The Federal Reserve has increased communication about the future path of the federal funds target rate over time. The use of forward guidance as a policy tool has raised questions about changes in how it influences the economy.

The Federal Reserve increasingly has relied on forward guidance about the future path of the federal funds rate to implement monetary policy since the federal funds target rate reached its effective lower bound. The enhanced use of forward policy guidance has drawn attention to any change in its...

To capture the evolving relationship between multiple economic variables, time variation in either coefficients or volatility is often incorporated into vector autoregressions (VARs). However, allowing time variation in coefficients or volatility without restrictions on their dynamic behavior...