Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287858 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Forecasting [ISSN:] 1099-131X [Volume:] 42 [Issue:] 3 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2023 [Pages:] 643-656
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
We estimate the effects of shocks to interest rate expectations on the four largest euro area economies. We identify these shocks in a Bayesian vector autoregressive (BVAR) model augmented by survey expectations. We separate the expectations shocks from standard monetary policy shocks by assuming that they do not affect the current policy rate. Our sign restrictions also ensure that these shocks do not contain central bank information shocks. We find that an expected decline in the future short‐term rate leads to an increase in output and prices. The increases do not become larger for changes to interest rate expectations further in the future, that is, we do not find evidence of a forward guidance puzzle. Using the multicountry structure of our model, we test for cross‐country differences in the shocks' effects and find output and price effects to be greatest in Germany. We also compare the effects of shocks to interest rate expectations to those of standard monetary policy shocks and show the first type to affect output and prices more strongly in Germany and France.
Subjects: 
Bayesian vector autoregression
euro area
expectations
forward guidance
regional effects of monetary policy
unconventional monetary policy
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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