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Communication About Future Policy Rates In Theory And Practice: A Survey

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  • Richhild Moessner
  • David-Jan Jansen
  • Jakob de Haan

Abstract

We discuss the theoretical rationale for central bank communication about future policy rates as part of inflation targeting or of forward guidance. We also summarize actual central bank communication about future policy rates in major advanced countries as well as empirical evidence on the effectiveness of both types of communication. We argue that there is a disconnect between the theory and practice of forward guidance, with theory assuming commitment by the central bank, while in practice central banks generally do not commit. Future theoretical research on forward guidance should therefore take the absence of commitment by central banks into account.
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  • Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
  • Handle: RePEc:bla:jecsur:v:31:y:2017:i:3:p:678-711
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    1. repec:bla:jecsur:v:32:y:2018:i:5:p:1229-1256 is not listed on IDEAS
    2. Gavin, William T. & Keen, Benjamin D. & Richter, Alexander & Throckmorton, Nathaniel, 2013. "The stimulative effect of forward guidance," Working Papers 2013-38, Federal Reserve Bank of St. Louis, revised 30 Apr 2014.
    3. Gersbach, Hans & Liu, Yulin & Tischhauser, Martin, 2018. "Versatile Forward Guidance: Escaping or Switching?," CEPR Discussion Papers 12559, C.E.P.R. Discussion Papers.
    4. Alan Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2017. "Necessity as the mother of invention: monetary policy after the crisis," Economic Policy, CEPR;CES;MSH, vol. 32(92), pages 707-755.
    5. Michelle Bongard & Gabriele Galati & Richhild Moessner & William Nelson, 2016. "Connecting the dots: market reactions to forecasts of policy rates and forward guidance provided by the Fed," DNB Working Papers 523, Netherlands Central Bank, Research Department.
    6. Yu‐Fu Chen & Michael Funke & Richhild Moessner, 2018. "Informal one‐sided target zone model and the Swiss franc," Review of International Economics, Wiley Blackwell, vol. 26(5), pages 1130-1153, November.
    7. Charles Bean, 2016. "Living with Low for Long," Economic Journal, Royal Economic Society, vol. 0(592), pages 507-522, May.
    8. repec:bla:ecinqu:v:55:y:2017:i:4:p:1593-1624 is not listed on IDEAS
    9. Gunda-Alexandra Detmers & Özer Karagedikli & Richhild Moessner, 2018. "Quantitative or Qualitative Forward Guidance: Does it Matter?," CESifo Working Paper Series 7314, CESifo Group Munich.
    10. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    11. repec:bla:ecaffa:v:38:y:2018:i:1:p:2-15 is not listed on IDEAS
    12. Jakob de Haan & Marco Hoeberichts & Renske Maas & Federica Teppa, 2016. "Inflation in the euro area and why it matters," DNB Occasional Studies 1403, Netherlands Central Bank, Research Department.
    13. Marc de la Barrera & Juraj Falath & Dorian Henricot & Jean-Alexandre Vaglio, 2017. "The Impact of Forward Guidance on Inflation Expectations: Evidence from the ECB," Working Papers 1010, Barcelona Graduate School of Economics.

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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