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 …

' (investors'?) motives are unobservable. This paper analyzes the crucial role of imperfect credibility in a currency crisis with a … innovations: (1) It specifies the cost of imperfect credibility, and (2) It quantifies the cost of imperfect credibility …. Imperfect credibility generates small (but costly) average interest rate differentials. Imperfect credibility cannot generate …