Year: 2022
Type: article
Abstract: Forward guidance is widely considered a useful tool for improving monetary policy transmission. This paper introduces endogenous Delphic guidance in which future policy targets are time-varying and dependent on the future economy. The results show that the performance of inflation-targeting forward guidance depends partially on the forward horizon and the agents’ expectation, while announcing an interim output target could stimulate the economy only under a rational expectation environment and requires a short forward horizon. We also discuss the effectiveness of Odyssean forward guidance which incorporates monetary authorities’ preferences. The results indicate that the effect of a commitment on future paths of an interest-rate rule is based on the agents’ expectations.
Authors: Xin Xu, Xin Xu, Xiaoguang Xu, Xiaoguang Xu
Institution: Shenzhen University
Language: English
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $944
Award: G8037961687
OpenAlex ID: W4310802811