International Spillovers of Forward Guidance Shocks

Author/Editor:

Callum Jones ; Mariano Kulish ; Daniel M. Rees

Publication Date:

May 15, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

After 2007, countries that cut their policy interest rates close to zero turned, among other policies, to forward guidance. We estimate a two-country model of the U.S. and Canada to quantify how unexpected changes in U.S. forward guidance affected Canada. Expansionary U.S. forward guidance shocks, like conventional policy shocks, are beggar-thy-neighbor and depress Canadian output, but by twice as much as conventional shocks. We find that the effect of U.S. forward guidance shocks on Canadian output, unlike conventional policy shocks, depends on the state of U.S. demand and can be five times smaller when U.S. demand is weak.

Series:

Working Paper No. 18/114

Subject:

English

Publication Date:

May 15, 2018

ISBN/ISSN:

9781484353554/1018-5941

Stock No:

WPIEA2018114

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

43

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