The effectiveness of forward guidance on the Norwegian yield curve: Is this in accordance with findings in the data?

Abstract

Inspired by previous research, we are going to perform an empirical analysis to test the effectiveness of forward guidance in Norway on market expectations using high-frequency data and an event-study approach. Further, we will investigate how forward guidance affects the term structure in Norway using the Nelson-Siegel-Svensson framework. More specifically, we will investigate Norges Bank’s press conferences and the following statements to examine how market expectations are influenced by monetary policy actions and statements. Using a two-dimensional approach, we find supporting evidence and conclude that forward guidance influences money market rates. Furthermore, by creating yield curves we examine relations between macro variables and the term structure of interest rates. We find evidence coinciding with the theory presented by Rudebusch and Wu, albeit be