We study zero interest-rate policy in response to a large negative demand shock when long-run expectations can fall over time. Because falling expectations make monetary policy less effective by raising real interest rates, the optimal forward guidance policy makes large front-loaded promises to...

In this paper, we use a unique database on expected monetary conditions from the Reserve Bank of New Zealand Survey of Expectations to study how policy signals are transmitted. In order to exploit the ordinal nature of the data, we run an ordered probit model where expected monetary conditions...

The hypothesis that a forward term-premium (FTP) exists between forward 1-day rates calculated from the New Zealand bank-risk yield curve and the corresponding ex-post Official Cash Rate (OCR) is tested by applying a single equation method for a cointegrated system to daily data from March 1999...