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EFFECTIVENESS OF MONETARY POLICY IN SWEDEN
Author(s) -
Moessner Richhild,
de Haan Jakob,
Jansen DavidJan
Publication year - 2016
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12160
Subject(s) - zero lower bound , economics , monetary policy , interest rate , forward guidance , monetary economics , conditionality , inflation targeting , credit channel , politics , political science , law
We study whether the sensitivity of Swedish interest rates to domestic economic news was affected by the zero lower bound ( ZLB ) and forward guidance. We find that the sensitivity was reduced at the ZLB at short but not at longer maturities, suggesting that monetary policy remained effective at longer horizons. Moreover, it was unaffected during a later period of the ZLB /negative policy rates, suggesting that monetary policy remained effective at all horizons then. We also find that the sensitivity of interest rates to domestic news was unaffected by forward guidance, suggesting that market participants understood the conditionality of the forward guidance. ( JEL E52, E58)