Arbeitspapier
Forward guidance with unanchored expectations
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 stabilize expectations. Policy is too stimulatory in the event of transitory shocks, but provides insurance against persistent shocks. The optimal policy is well-approximated by a constant calendar-based forward guidance, independent of the shock's realised persistence. The insurance property distinguishes our paper from other bounded rationality papers that solve the forward guidance puzzle and generates important quantitative differences.
- ISBN
-
978-952-323-384-3
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Finland Research Discussion Papers ; No. 11/2021
- Klassifikation
-
Wirtschaft
Business Fluctuations; Cycles
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Expectations; Speculations
- Thema
-
Optimal Monetary Policy
Learning Dynamics
Expectations Stabilization
Forward Guidance
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Eusepi, Stefano
Gibbs, Chris
Preston, Bruce
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Finland
- (wo)
-
Helsinki
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Eusepi, Stefano
- Gibbs, Chris
- Preston, Bruce
- Bank of Finland
Entstanden
- 2021
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