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Forward guidance shocks

Mirela Miescu

No 352591340, Working Papers from Lancaster University Management School, Economics Department

Abstract: I estimate the effects of a forward guidance (FG) shock and compare it with a traditional monetary policy (MP) shock. I find that FG shocks have smaller effects on macroeconomic aggregates than MP shocks. Structural identification is reached by a novel heteroscedascticity-based approach that exploits (i) the introduction of the forward guidance in the form of a published policy-rate path in the US in January 2012; and (ii) the zero lower bound (ZLB) constraints. My findings are consistent with the predictions of the latest theories about the FG puzzle.

Keywords: forward guidance; Monetary policy; event study; heteroscedasticity; structural VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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