The power of forward guidance in a quantitative TANK model
Sebastian Giesen and
Economics Letters, 2020, vol. 186, issue C
We quantify the macroeconomic effects of interest rate forward guidance in an estimated medium-scale Two-Agent New Keynesian (TANK) model. Although TANK models can in principle dampen or amplify the power of forward guidance compared to a representative agent model, our estimates indicate a dampening, as there is sufficient countercyclical redistribution. An interaction of forward guidance with asset purchases gives rise to non-linear effects that depend on the horizon of the interest rate peg.
Keywords: Forward guidance; Hand-to-mouth households; Redistribution; Bayesian estimation; Asset purchase program (search for similar items in EconPapers)
JEL-codes: E44 E52 E62 (search for similar items in EconPapers)
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Working Paper: The power of forward guidance in a quantitative TANK model (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519304197
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