• About
  • Policies
  • What is openaccess
  • Library
  • Contact
Advanced search
      View Item 
      •   BUIR Home
      • University Library
      • Bilkent Theses
      • Theses - Department of Economics
      • Dept. of Economics - Ph.D. / Sc.D.
      • View Item
      •   BUIR Home
      • University Library
      • Bilkent Theses
      • Theses - Department of Economics
      • Dept. of Economics - Ph.D. / Sc.D.
      • View Item
      JavaScript is disabled for your browser. Some features of this site may not work without it.

      Essays on forward guidance

      Thumbnail
      View / Download
      1.2 Mb
      Author
      Akkaya, Yıldız
      Advisor
      Gürkaynak, Refet S.
      Date
      2014
      Publisher
      Bilkent University
      Language
      English
      Type
      Thesis
      Item Usage Stats
      53
      views
      48
      downloads
      Metadata
      Show full item record
      Abstract
      This dissertation consists of three essays on forward guidance, central bank verbal guidance on future policy rates, and shows how economies respond to it both theoretically and empirically. In the first essay the effects of forward guidance on real economy through interest rate uncertainty is studied as explicit numerical guidance lowers the uncertainty around future interest rates. To analyze the effects of such a policy a New Keynesian model framework incorporating interest rate uncertainty is developed. The results show that a decrease in the uncertainty of interest rates is expansionary in its own right, independent of the level of interest rates the central bank commits to. Thus, distinct from the literature, a new channel for the effectiveness of forward guidance is suggested. The second essay studies the question of whether the optimal amount of interest rate uncertainty is always zero, or whether monetary policy makers may benefit from an increase in the uncertainty. For this purpose a two-country open economy New Keynesian model with interest rate uncertainty is developed, and the effects of interest rate uncertainty on capital flows and exchange rates are studied. The results emphasize that the impact of an increase in the volatility of interest rate mimics the impacts of an increase in the level of the interest rate, and this suggests that uncertainty about the policy rate path can be used by the central bank as a policy tool. The third essay is empirical, and analyses the sensitivity of the interest rates of various maturities to monetary policy uncertainty, which depends on the language used in the monetary policy statements. To measure market responses to the announcements, I first calculate monetary policy surprises and uncertainty surprises by using Federal Funds Futures and Eurodollar Options, respectively. In the event-study analysis it is shown that the reduction in the variability of monetary policy rate expectations due to the explicit content of the statements, has significant effect on the long-term treasury notes.
      Keywords
      Forward guidance
      Monetary policy
      Volatility shocks
      New Keynesian models
      Monetary policy surprises
      Event study methodology
      Permalink
      http://hdl.handle.net/11693/18607
      Collections
      • Dept. of Economics - Ph.D. / Sc.D. 41

      Browse

      All of BUIRCommunities & CollectionsTitlesAuthorsAdvisorsBy Issue DateKeywordsTypeDepartmentsThis CollectionTitlesAuthorsAdvisorsBy Issue DateKeywordsTypeDepartments

      My Account

      Login

      Statistics

      View Usage Statistics

      Bilkent University

      If you have trouble accessing this page and need to request an alternate format, contact the site administrator. Phone: (312) 290 1771
      Copyright © Bilkent University | Library IT

      Contact Us | Send Feedback | Off-Campus Access | Admin