US forward guidance is contractionary for Canada – BIS paper


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Surprise announcements of forward guidance in the US tend to exert a drag on the Canadian economy, research published by the Bank for International Settlements finds.

Callum Jones, Mariano Kulish and Daniel Rees have developed an identification method for “forward guidance shocks” similar to that widely used for policy rate shocks. With the policy rate stuck at the zero lower bound, unanticipated changes to the expected path of the policy rate can be interpreted as forward guidance shocks

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