In this paper we assess whether forward guidance for monetary policy regarding the future path of interest rates is desirable. We distinguish between two cases where forward guidance for monetary policy may be helpful. First, forward guidance may reveal private information of the central bank....

The article compares the social efficiency of monetary targeting and inflation targeting when central banks may have private information on shocks to money demand and the transparency solution is not feasible because of verifiability problems. Under inflation targeting and monetary targeting,...