Beliefs formation and the puzzle of forward guidance power

Giovanni Di Bartolomeo (), Elton Beqiraj and Marco Di Pietro ()

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: We study the extent to which the belief-formation process affects the dynamics of macroeconomic variables when the central bank uses forward guidance. Standard sticky-price models imply that far future forward guidance has huge and implausible effects on current outcomes, these effects grow in its horizon (forward guidance power puzzle). By a parsimonious macro-model that allows for the role of bounded rationality and heterogeneous agents, we obtain tempered responses for real and nominal variables.

Keywords: forward guidance power; heterogeneous agents; bounded rationality; monetary policy; announcements (search for similar items in EconPapers)
JEL-codes: E21 E40 E50 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/175198/1/FG_paper_06.pdf (application/pdf)

Related works:
Journal Article: Beliefs formation and the puzzle of forward guidance power (2019)
Working Paper: Beliefs formation and the puzzle of forward guidance power (2017)
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:zbw:esprep:175198

Access Statistics for this paper

More papers in EconStor Preprints from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().