Arbeitspapier
Bank of Canada communication and the predictability of Canadian monetary policy
We explain changes in the Canadian target rate using macroeconomic variables and Bank of Canada (BOC) communication indicators. Econometrically, we employ an ordered probit model of a Taylor rule to predict 60 target rate decisions between 1998 and 2006. We find that BOC communication is forward-looking, with a horizon that goes beyond the next meeting. Speeches and testimonies by Governing Council members have a statistically significant impact, whereas the less frequent monetary policy reports are insignificant. These communication variables significantly explain target rate changes but have no additional explanatory power over a standard Taylor rule. Prior to the introduction of Fixed Announcement Dates, BOC communication contained more information on upcoming policy moves. Communications by the U.S. Federal Reserve Bank (Fed)which are much more frequentoutperform our Canadian communication indicators in predicting Canadian target rate decisions. We conclude that if the BOC is interested in improving the predictability of its monetary policy decisions, it should follow the Fed and use informal types of communication more frequently.newswire reports of Fed communications.
- Language
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Englisch
- Bibliographic citation
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Series: MAGKS Joint Discussion Paper Series in Economics ; No. 2009,35
- Classification
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Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
- Subject
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Bank of Canada
Central Bank Communication
Interest Rate Decision
Monetary Policy
Ordered Probit Model
Taylor Rule
- Event
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Geistige Schöpfung
- (who)
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Hayo, Bernd
Neuenkirch, Matthias
- Event
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Veröffentlichung
- (who)
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Philipps-University Marburg, Faculty of Business Administration and Economics
- (where)
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Marburg
- (when)
-
2009
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hayo, Bernd
- Neuenkirch, Matthias
- Philipps-University Marburg, Faculty of Business Administration and Economics
Time of origin
- 2009
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