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Staff discussion papers

Has the Inclusion of Forward-Looking Statements in Monetary Policy Communications Made the Bank of Canada More Transparent?

Staff Discussion Paper 2010-15 Christine Fay, Toni Gravelle
To investigate the extent to which the transparency of the Bank of Canada's monetary policy has improved, the authors examine empirically – over the period 30 October 2000 to 31 May 2007 – the reaction of Canadian financial markets to official Bank communications, and in particular their reaction to the recent inclusion of forward-looking policy-rate guidance in these communications.
Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Interest rates, Monetary policy communications, Monetary policy transmission JEL Code(s): E, E5, E52, E58

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Bank publications

Bank of Canada Review articles

November 11, 2008

The Market Impact of Forward-Looking Policy Statements: Transparency vs. Predictability

Bank of Canada Review - Winter 2008-2009 Christine Fay, Toni Gravelle
Central banks continuously strive to improve how they communicate to financial markets and the public in order to increase transparency. For this reason, many central banks have begun to include guidance on the policy rate in the form of forward-looking statements in their communications. This article examines the debate over the usefulness of providing such statements from both theoretical and empirical standpoints. The evidence presented here suggests that the use of forward-looking statements in Bank of Canada communications has made the Bank more predictable, but not necessarily more transparent.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Interest rates, Monetary policy transmission

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Financial System Review articles