After 2007, countries that cut their policy interest rates close to zero turned, amongother policies, to forward guidance. We estimate a two-country model of the U.S. andCanada to quantify how unexpected changes in U.S. forward guidance affected Canada.Expansionary U.S. forward guidance shocks,...

After 2007, countries that cut their policy interest rates close to zero turned, among other policies, to forward guidance. We estimate a two-country model of the U.S. and Canada to quantify how unexpected changes in U.S. forward guidance affected Canada. Expansionary U.S. forward guidance...

We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward...