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COMMUNICATION ABOUT FUTURE POLICY RATES IN THEORY AND PRACTICE: A SURVEY
Author(s) -
Moessner Richhild,
Jansen DavidJan,
de Haan Jakob
Publication year - 2017
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12169
Subject(s) - commit , central bank , economics , monetary policy , inflation (cosmology) , forward guidance , inflation targeting , empirical evidence , macroeconomics , credit channel , computer science , philosophy , physics , epistemology , database , theoretical physics
We discuss the theoretical rationale for central bank communication about future policy rates, either as part of inflation targeting or in the form of forward guidance. We also summarize both actual central bank communication about future policy rates and empirical evidence on the effectiveness of these types of communication. We argue that there is a disconnect between the theory and practice of forward guidance, as theory assumes commitment on the part of the central bank, while in practice central banks generally do not commit. Future theoretical research on forward guidance should therefore take the absence of commitment by central banks into account.