Central Bank Communication and Disagreement about the Natural Rate Hypothesis
Carola Binder ()
International Journal of Central Banking, 2021, vol. 17, issue 2, 81-123
About half of professional forecasters report that they use the natural rate of unemployment (u∗) to forecast. I show that forecasters' reported use of and estimates of u∗ are informative about their expectations-formation process, including their use of a Phillips curve. Those who report not using u∗ have higher and less anchored inflation expectations, and seem to have found the Federal Reserve's state-based forward guidance less credible. The Federal Open Market Committee (FOMC) publishes participants' projections of longer-run unemployment in the Summary of Economic Projections. I document how and when the FOMC participants have disagreed with each other and with the private sector, discussing possible sources of disagreement and implications for credibility.
JEL-codes: D83 D84 E43 E52 E58 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2021:q:2:a:3
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