Leaning Against the Data: Policymaker Communications under State-Based Forward Guidance

Taeyoung Doh, Joseph Gruber and Dongho Song

No RWP 22-11, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: A purported benefit of state-based forward guidance is that the private sector adjusts the expected stance of policy without further policymaker communications. This assumes a shared understanding of how policymakers are interpreting the data and that policymakers are consistent in their assessment of the data. Using text analysis, we test whether the FOMC’s introduction of state-based forward guidance in December 2012 changed the tone of policymaker communications. We find that policymakers tended to downplay positive data following the introduction of the guidance, in effect leaning against the data and reinforcing the dependence of policy expectations on policymaker communications.

Keywords: Monetary policy; Forward guidance; Financial markets (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 G12 (search for similar items in EconPapers)
Pages: 16
Date: 2022-09-08
New Economics Papers: this item is included in nep-big, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.kansascityfed.org/Research%20Working%2 ... -11dohgrubersong.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkrw:94764

Ordering information: This working paper can be ordered from

DOI: 10.18651/RWP2022-11

Access Statistics for this paper

More papers in Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().