EconPapers    
Economics at your fingertips  
 

Forward Guidance and Heterogeneous Beliefs

Philippe Andrade, Gaetano Gaballo (), Eric Mengus and Benoit Mojon ()

American Economic Journal: Macroeconomics, 2019, vol. 11, issue 3, 1-29

Abstract: Central banks' announcements that rates are expected to remain low could signal either a weak macroeconomic outlook, which would slow expenditures, or a more accommodative stance, which may stimulate economic activity. We use the Survey of Professional Forecasters to show that, when the Fed gave guidance between 2011:III and 2012:IV, these two interpretations coexisted despite a consensus on low expected rates. We rationalize these facts in a New-Keynesian model where heterogeneous beliefs introduce a trade-off in forward guidance policy: leveraging on the optimism of those who believe in monetary easing comes at the cost of inducing excess pessimism in non-believers.

JEL-codes: D83 E12 E43 E52 E58 E65 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mac.20180141
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20180141 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20180141.data (application/zip)
https://www.aeaweb.org/doi/10.1257/mac.20180141.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20180141.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Forward guidance and heterogeneous beliefs (2018) Downloads
Working Paper: Forward Guidance and Heterogeneous Beliefs (2018) Downloads
Working Paper: Forward Guidance and Heterogeneous Beliefs (2016) Downloads
Working Paper: Forward guidance and heterogenous beliefs (2016) Downloads
Working Paper: Forward Guidance and Heterogeneous Beliefs (2015) Downloads
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:aea:aejmac:v:11:y:2019:i:3:p:1-29

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2019-11-12
Handle: RePEc:aea:aejmac:v:11:y:2019:i:3:p:1-29