International Effects of Euro Area Forward Guidance

Böck M, Feldkircher M, Siklos PL (2021)

Publication Type: Journal article

Publication year: 2021

Journal

Oxford Bulletin of Economics and Statistics Wiley-Blackwell

Book Volume: 83

Pages Range: 1066 - 1110

Journal Issue: 5

DOI: 10.1111/obes.12438

Abstract

In this paper, we investigate the international effects of euro rate forward guidance (FG) and compare them to spillovers from a conventional monetary policy shock (MP). We identify the forward guidance shock via a combination of zero and sign restrictions that use the relationship between expectations and observed data and additionally draw on insights from recent event studies using high-frequency data. To address potential time variation, we use a fully flexible approach that allows to handle both drifts in residual variances and the structural coefficients. Our results show that both shocks lead to considerable international effects on output growth, inflation and equity returns. Moreover, we find that effects are stronger during the period of the global financial crisis, which is particularly true for the FG shock. This implies that monetary policy is generally not hindered in affecting the real economy by the zero lower bound. Also, shocks to expectations can have real domestic effects with international consequences.

Authors with CRIS profile

Maximilian Böck Lehrstuhl für Statistik und Ökonometrie

Involved external institutions

Oesterreichische Nationalbank AT Austria (AT)

How to cite

APA:

Böck, M., Feldkircher, M., & Siklos, P.L. (2021). International Effects of Euro Area Forward Guidance. Oxford Bulletin of Economics and Statistics, 83(5), 1066 - 1110. https://doi.org/10.1111/obes.12438

MLA:

Böck, Maximilian, Martin Feldkircher, and Pierre L Siklos. "International Effects of Euro Area Forward Guidance." Oxford Bulletin of Economics and Statistics 83.5 (2021): 1066 - 1110.

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