Cole, Stephen J.; Martínez-García, Enrique; Sims, Eric R. - National Bureau of Economic Research - 2023
This paper studies the effectiveness of forward guidance when central banks have imperfect credibility. Exploiting … expectations. In our model, the key parameter that aggregates heterogeneous expectations captures the central bank's credibility …, and other major advanced economies have similar levels of credibility (albeit far from full credibility); however, Japan …