Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248315 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2021-54
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper evaluates the effects of forward guidance and large-scale asset purchases (LSAP) when the nominal interest rate reaches the zero lower bound. I investigate the effects of the two policies in a dynamic new Keynesian model with financial frictions adapted from Gertler and Karadi (2011, 2013), with changes implemented so that the framework delivers realistic predictions for the effects of each policy on the entire yield curve. I then match the change that the model predicts would arise from a linear combination of the two shocks with the observed change in the yield curve in a 30-minute window around Federal Reserve announcements, allowing me to identify the separate contributions of each shock to the effects of the announcement. My estimates imply that LSAP was more important in influencing output and inflation than forward guidance.
Subjects: 
Business fluctuations and cycles
Central bank research
Econometric and statisticalmethods
Interest rates
JEL: 
E
E5
G
G0
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
739.01 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.