Faithin Omaha eBook Collection

Download or read book International Spillovers of Forward Guidance Shocks written by Callum Jones and published by International Monetary Fund. This book was released on 2018-05-15 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.