We examine "Forward Guidance Contracts", which make central bankers' utility contingent on the precision of interest-rate forecasts. We integrate those contracts into the New Keynesian Framework and study how they can be used to overcome a liquidity trap. We establish the properties of simple...

This paper compares the effectiveness of date- and state-based forward guidance issued by the Federal Reserve since mid-2011 accounting for the influence of disagreement within the FOMC. I find that the Fed’s forward guidance reduces the sensitivity of interest rates to macroeconomic news. The...

This paper explores how credit demand affects the pass-through of monetary policy to bank lending. We employ a novel identification strategy based on exploiting exogenous cross-sectional variation in local mortgage credit demand across U.S. counties following the occurrence of large natural...