Increasingly many central banks announce likely paths for future policy rates. Recent experience suggest that market forward rates can differ substantially from those announced. Models commonly adopted in policy analysis ignore such differences. This paper studies a simple model that can capture...

Macroeconomic research often relies on structural vector autoregressions to uncover empirical regularities. Critics argue the method goes awry due to lag truncation: short lag-lengths imply a poor approximation to DSGE-models. Empirically, short lag-length is deemed necessary as increased...

Fiscal theorists warn about the risk of future in.ation as a consequence of current fiscal imbalances in the US. Because actual in.ation remains historically low and data on inflation expectations do not corroborate such risks, warnings for fiscal inflation are often ignored in policy and...

Forward guidance policies are often argued to stimulate economic activity by reducing nominal long term interest rates. We document why a lower nominal long rate is neither necessary nor sufficient for forward guidance to be successful. We determine the mechanisms behind widely varying long rate...