Forward guidance and heterogeneous beliefs
Central banks' announcements that rates are expected to remain low could signal either a weak macroeconomic outlook, which would slow expenditures, or a more accommodative stance, which may stimulate economic activity. We use the Survey of Professional Forecasters to show that, when the Fed gav...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
American Economic Association
2019
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| Online Access: | View Fulltext in Publisher |
| LEADER | 01267nam a2200169Ia 4500 | ||
|---|---|---|---|
| 001 | 10.1257-mac.20180141 | ||
| 008 | 220511s2019 CNT 000 0 und d | ||
| 020 | |a 19457707 (ISSN) | ||
| 245 | 1 | 0 | |a Forward guidance and heterogeneous beliefs |
| 260 | 0 | |b American Economic Association |c 2019 | |
| 856 | |z View Fulltext in Publisher |u https://doi.org/10.1257/mac.20180141 | ||
| 520 | 3 | |a Central banks' announcements that rates are expected to remain low could signal either a weak macroeconomic outlook, which would slow expenditures, or a more accommodative stance, which may stimulate economic activity. We use the Survey of Professional Forecasters to show that, when the Fed gave guidance between 2011:III and 2012:IV, these two interpretations coexisted despite a consensus on low expected rates. We rationalize these facts in a New-Keynesian model where heterogeneous beliefs introduce a trade-off in forward guidance policy: leveraging on the optimism of those who believe in monetary easing comes at the cost of inducing excess pessimism in non-believers. © 2019 American Economic Association. | |
| 700 | 1 | |a Andrade, P. |e author | |
| 700 | 1 | |a Gaballo, G. |e author | |
| 700 | 1 | |a Mengus, E. |e author | |
| 700 | 1 | |a Mojon, B. |e author | |
| 773 | |t American Economic Journal: Macroeconomics | ||