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Forward guidance: A new challenge for central banks

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  • Issing, Otmar

Abstract

In a contribution prepared for the Athens Symposium on 'Banking Union, Monetary Policy and Economic Growth', Otmar Issing describes forward guidance by central banks as the culmination of the idea of guiding expectations by pure communication. In practice, he argues, forward guidance has proved a misguided idea. What is presented as state of the art monetary policy is an example of pretence of knowledge. Forward guidance tries to give the impression of a kind of rule-based monetary policy. De facto, however, it is an overambitious discretionary approach which, to be successful, would need much more (or rather better) information than is currently available. In Issing's view, communication must be clear and honest about the limits of monetary policy in a world of uncertainty.

Suggested Citation

  • Issing, Otmar, 2014. "Forward guidance: A new challenge for central banks," SAFE White Paper Series 16, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:16
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    References listed on IDEAS

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    1. Holbrook, Robert S, 1972. "Optimal Economic Policy and the Problem of Instrument Instability," American Economic Review, American Economic Association, vol. 62(1), pages 57-65, March.
    2. Orphanides, Athanasios, 2013. "Is monetary policy overburdened?," IMFS Working Paper Series 75, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    3. Allan H. Meltzer, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall.
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    Cited by:

    1. Radosław Ciukaj, 2016. "Managing Financial Stability By The European Central Bank In The Period 2008–2012," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 5(2), pages 57-72.
    2. Issing, Otmar, 2016. "Central banks: From overburdening to decline?," SAFE White Paper Series 42, Leibniz Institute for Financial Research SAFE.
    3. 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.
    4. Jakob de Haan, 2025. "No Way Back? ECB’s Forward Guidance and Policy Normalisation," Politics and Governance, Cogitatio Press, vol. 13.
    5. Derya Yılmaz, 2015. "Unconventional Monetary Policies in the Eurozone: Considering Theoretical Backgrounds and Policy Outcomes," Business and Economics Research Journal, Bursa Uludag University, Faculty of Economics and Administrative Sciences, vol. 6(3), pages 51-68.
    6. Issing, Otmar, 2014. "Communication and transparency – The example of the ECB," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 70-73.
    7. Issing, Otmar, 2018. "Stabiles Geld - eine Illusion? Alternative Währungssysteme - Hayeks Fundamentalkritik - Unabhängigkeit der Notenbanken," SAFE White Paper Series 52, Leibniz Institute for Financial Research SAFE.

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