We develop a model of monetary policy with two key features: (i) the central bank has private information about its long-run target for the policy rate; and (ii) the central bank is averse to bond-market volatility. In this setting, discretionary monetary policy is gradualist, or inertial, in the...

This paper asks the question: can central bank transparency go too far? Transparency is beneficial only when it serves to simplify communication with the public and helps generate support for central banks to conduct monetary policy optimally with an appropriate focus on long-run objectives....

A notable change in central banking over the past 15 years has been a world-wide movement toward increased communication by central banks about their policy decisions, the targets that they seek to achieve through those decisions, and the central bank's view of the economy's likely future...

I extend the methods of G ̈urkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009–15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and...

We study the effect of releasing public information about productivity or monetary shocks when agents learn from nominal prices. While public releases have the benefit of providing new information, they can have the cost of reducing the informational efficiency of the price system. We show that,...

We propose a new framework for understanding the effectiveness of central bank announcements when firms have heterogeneous inflation expectations. Expectations are updated through social dynamics and, with heterogeneity, not all firms choose to operate, putting downward pressure on realized...

This paper considers the uncertainty associated with upcoming Federal Open Market Committee (FOMC) announcements and the extent to which the market begins to set up for such announcements well before they actually occur. We demonstrate that markets set up well in advance of known announcement...

In recent years, central banks have increasingly turned to “forward guidance” as a central tool of monetary policy, especially as interest rates around the world have hit the zero lower bound. Standard monetary models imply that far future forward guidance is extremely powerful: promises...

This paper examines what we have learned and how we should change our thinking about monetary policy strategy in the aftermath of the 2007-2009 financial crisis. It starts with a discussion of where the science of monetary policy was before the crisis and how central banks viewed monetary policy...

Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian reasoning, lies between the Friedman-rule value of...