We assess the power of forward guidance--promises about future interest rates--as a monetary tool in a liquidity trap using a quantitative incomplete-markets model. Our results suggest the effects of forward guidance are negligible. A commitment to keep future nominal interest rates low for a...

Central banks no longer set the short-term interest rates that they use for monetary policy purposes by manipulating the supply of banking system reserves, as in conventional economics textbooks; today this process involves little or no variation in the supply of central bank liabilities. In...

Many authors argue that asymmetric information between the Federal Reserve and the public is important to the conduct and the effects of monetary policy. This paper tests for the existence of such asymmetric information by examining Federal Reserve and commercial inflation forecasts. We...

The modern view of monetary policy stresses its role in shaping the entire yield curve of interest rates in order to achieve various macroeconomic objectives. A crucial element of this process involves guiding financial market expectations of future central bank actions. Recently, a few central...

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 about...

I extend the methods of Gürkaynak, 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...

This paper studies how the creation of a European Central Bank (ECB) will change the political economy of monetary policy in Europe. The twelve governors of the national Central Banks of the EEC have recently proposed a statute for the ECB which delineates its institutional structure. In this...

We quantify the importance of non-monetary news in central bank communication. Using evidence from four major central banks and a comprehensive classification of events, we decompose news conveyed by central banks into news about monetary policy, economic growth, and separately, shocks to risk...

Starting from a set of facts on the timing of stock returns relative to Federal Reserve decision-making, I argue that informal communication - including unattributed communication -- plays a central role in monetary policy communication. This contrasts with the standard communications framework...