Beliefs formation and the puzzle of forward guidance power

Giovanni Di Bartolomeo, Elton Beqiraj, and Marco Di Pietro

We study the extent to which the belief-formation process affects the dynamics of macroeconomic variables when the central bank uses forward guidance. Standard sticky-price models imply that far future forward guidance has huge and implausible effects on current outcomes, these effects grow in its horizon (forward guidance power puzzle). By a parsimonious macro-model that allows for the role of bounded rationality and heterogeneous agents, we obtain tempered responses for real and nominal variables.

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Year of publication:	2017
Authors:	Di Bartolomeo, Giovanni ; Beqiraj, Elton ; Di Pietro, Marco
Publisher:	Rome : Sapienza University of Rome
Subject:	forward guidance power \| heterogeneous agents \| bounded rationality \| monetary policy \| announcements \| Theorie \| Theory \| Geldpolitik \| Monetary policy \| Begrenzte Rationalität \| Bounded rationality \| Ankündigungseffekt \| Announcement effect \| Rationale Erwartung \| Rational expectations \| Politische Kommunikation \| Political communication \| Erwartungsbildung \| Expectation formation

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Extent:	1 Online-Ressource (circa 28 Seiten) Illustrationen
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature
Language:	English
Other identifiers:	hdl:10419/175198 [Handle]
Classification:	E40 - Money and Interest Rates. General ; E50 - Monetary Policy, Central Banking and the Supply of Money and Credit. General ; E21 - Consumption; Saving
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10011799546