Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
The effect of Negative Interest Rate Policy (NIRP) and rate Forward Guidance (FG) on the yield curve is very similar with both policies exerting their maximal impact on a same spectrum of short-to-medium term maturities. Yet, we find that their impact on the predictive interest rate distribution differs. Accommodative FG prices out high interest rate trajectories, thus affecting upper percentiles; NIRP changes the market pricing of the effective lower bound on the policy rate, thus affecting lower percentiles. Building on this evidence, we combine option-implied rate densities with event-study analysis to separate the effects of NIRP and FG. We find that the impact of the ECB's NIRP on forward rates was stronger than that of FG.