Search Results

Showing results 1 to 9 of approximately 9.

(refine search)
SORT BY: PREVIOUS / NEXT
Keywords:Forward Guidance 

Working Paper
The stimulative effect of forward guidance

This paper examines the stimulative effect of central bank forward guidance?the promise to keep future policy rates lower than its policy rule suggests?when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).We utilize a standard New Keynesian model in which forward guidance enters our model as news shocks to the monetary policy rule. Three key findings emerge: (1) Forward guidance is more stimulative at the ZLB when households believe the economic recovery will be strong. When households expect a weak recovery or initially have low confidence in the economy, forward ...
Working Papers , Paper 2013-38

Working Paper
The Effect of Central Bank Credibility on Forward Guidance in an Estimated New Keynesian Model

This paper examines the effectiveness of forward guidance in an estimated New Keynesian model with imperfect central bank credibility. We estimate credibility for the U.S. Federal Reserve with Bayesian methods exploiting survey data on interest rate expectations from the Survey of Professional Forecasters (SPF). The results provide important takeaways: (1) The estimate of Federal Reserve credibility in terms of forward guidance announcements is relatively high, which indicates muted forward guidance effectiveness relative to the fully credible case. Hence, anticipation effects are attenuated ...
Globalization Institute Working Papers , Paper 375

Working Paper
Should We Be Puzzled by Forward Guidance?

Although a growing literature argues output is too sensitive to future interest rates in standard macroeconomic models, little empirical evidence has been put forth to evaluate this claim. In this paper, we use a range of vector autoregression models to answer the central question of how much output responds to changes in interest rate expectations following a monetary policy shock. Despite distinct identification strategies and sample periods, we find surprising agreement regarding this elasticity across empirical models. We then show that in a standard model of nominal rigidity estimated ...
Research Working Paper , Paper RWP 20-01

Working Paper
Reconciling VAR-based Forecasts with Survey Forecasts

This paper proposes a novel Bayesian approach to jointly model realized data and survey forecasts of the same variable in a vector autoregression (VAR). In particular, our method imposes a prior distribution on the consistency between the forecast implied by the VAR and the survey forecast for the same variable. When the prior is placed on unconditional forecasts from the VAR, the prior shapes the posterior of the reduced-form VAR coefficients. When the prior is placed on conditional forecasts (specifically, impulse responses), the prior shapes the posterior of the structural VAR ...
Research Working Paper , Paper RWP 18-13

Discussion Paper
The Macroeconomic Effects of Forward Guidance

In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic activity with only small effects on inflation.
Liberty Street Economics , Paper 20130225

Working Paper
Equilibrium Yield Curves and the Interest Rate Lower Bound

We study the term structure of default-free interest rates in a sticky-price model with an occasionally binding effective lower bound (ELB) constraint on interest rates and recursive preferences. The ELB constraint induces state-dependency in the dynamics of term premiums by affecting macroeconomic uncertainty and interest-rate sensitivity to economic activities. In a model calibrated to match key features of the aggregate economy and term structure dynamics in the U.S. above and at the ELB, we find that the ELB constraint typically lowers the absolute size of term premiums at the ELB and ...
Finance and Economics Discussion Series , Paper 2016-085

Working Paper
Credible Forward Guidance

We analyze credible forward guidance policies in a sticky-price model with an effective lower bound (ELB) constraint on nominal interest rates by solving a series of optimal sustainable policy problems indexed by the duration of reputational loss. Lower-for-longer policies---while effective in stimulating the economy at the ELB---are potentially time-inconsistent, as the associated overheating of the economy in the aftermath of a crisis is undesirable ex post. However, if reneging on a lower-for-longer promise leads to a loss of reputation and prevents the central bank from effectively using ...
Finance and Economics Discussion Series , Paper 2019-037

Working Paper
The Effect of Central Bank Credibility on Forward Guidance in an Estimated New Keynesian Model

This paper examines the effectiveness of forward guidance in an estimated New Keynesian model with imperfect central bank credibility. We estimate credibility for the U.S. Federal Reserve with Bayesian methods exploiting survey data on interest rate expectations from the Survey of Professional Forecasters (SPF). The results provide important takeaways: (1) The estimate of Federal Reserve credibility in terms of forward guidance announcements is relatively high, which indicates a degree of forward guidance effectiveness, but still one that is below the fully credible case. Hence, anticipation ...
Globalization Institute Working Papers , Paper 375

Working Paper
The Effect of Central Bank Credibility on Forward Guidance in an Estimated New Keynesian Model

This paper examines the effectiveness of forward guidance in an estimated New Keynesian model with imperfect central bank credibility. Forward guidance and the credibility of the central bank are uniquely modeled by utilizing a game-theoretic evolutionary framework. We estimate credibility for the U.S. Federal Reserve with Bayesian methods exploiting survey data on interest rate expectations from the Survey of Professional Forecasters (SPF). The results provide important takeaways: (1) The estimate of Federal Reserve credibility in terms of forward guidance announcements is relatively high, ...
Globalization Institute Working Papers , Paper 375

FILTER BY year

FILTER BY Content Type

FILTER BY Jel Classification

E52 6 items

E58 4 items

D84 3 items

E30 3 items

E32 3 items

E50 3 items

show more (15)

PREVIOUS / NEXT