Forward Guidance for Monetary Policy: Is It Desirable?

Hans Gersbach and Volker Hahn

No 08/84, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In this paper we assess whether forward guidance for monetary policy regarding the future path of interest rates is desirable. We distinguish between two cases where forward guidance for monetary policy may be helpful. First, forward guidance may reveal private information of the central bank. We argue that vague, non-binding statements may be desirable. Second, forward guidance may be used as a commitment device. In this case, policy forecasts may be desirable in a classic inflation-bias framework but not in a New Keynesian framework.

Keywords: central banks; transparency; commitment; Federal Reserve; policy inclinations; signaling (search for similar items in EconPapers)
JEL-codes: D70 E58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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