Introducing our Forward Guidance Indicator
By Lars Christensen, Markets & Money Advisory Founder and CEO, LC@mamoadvisory.com, @
Today we have published the November edition of Global Monetary Condition Monitor our monthly flagship publication, which covers monetary policy in 26 countries around the world and gives an overview of global monetary matters and market implications of global monetary trends.
Since 2008, central banks around the world have increasingly focused on providing so-called forward guidance for their policies. Because monetary policy to a very large extent works through the ‘expectational channel’, forward guidance in itself has become an important driver of global monetary conditions.
The use of forward guidance is particularly important in countries where interest rates are close to the Zero Lower Bound. Because interest rates have fallen for structural reasons, it is very likely that we will see more rather than less forward guidance from central banks in the future.
With forward guidance becoming more common around the world and central banks hard at work on improving and structuring its use, both market and academic interest in the topic has grown. However, there is no universally accepted quantitative measure of the concept, even though some academic studies have moved in this direction in recent years.
In this edition of the Global Monetary Conditions Monitor, we introduce our own quantitative measure, the Forward Guidance Indicator (FGI).
We start out by calculating Forward Guidance Indicators for the Federal Reserve and the ECB. In the coming months, the Monitor will introduce forward guidance indicators for other central banks.
The price for a single 12-months subscription to Global Monetary Conditions Monitor is EUR 2,000 (EUR 1,000 for academic institutions and think tanks).
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