Original scientific paper
https://doi.org/10.1080/1331677X.2022.2145983
Forward guidance investigation in new Keynesian models
Xin Xu
Xiaoguang Xu
Abstract
Forward guidance is widely considered a useful tool for improving
monetary policy transmission. This paper introduces endogenous
Delphic guidance in which future policy targets are time-varying
and dependent on the future economy. The results show that the
performance of inflation-targeting forward guidance depends partially
on the forward horizon and the agents’ expectation, while
announcing an interim output target could stimulate the economy
only under a rational expectation environment and requires
a short forward horizon. We also discuss the effectiveness of
Odyssean forward guidance which incorporates monetary authorities’
preferences. The results indicate that the effect of a commitment
on future paths of an interest-rate rule is based on the
agents’ expectations
Keywords
Delphic forward guidance; Odyssean forward guidance; monetary policy
Hrčak ID:
306811
URI
Publication date:
30.4.2023.
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