COMMUNICATION ABOUT FUTURE POLICY RATES IN THEORY AND PRACTICE: A SURVEY. (30th June 2016)

• Record Type: Journal Article
• Authors: Moessner, Richhild; Jansen, David‐Jan; de Haan, Jakob
• Is Part Of: Journal of economic surveys. Volume 31:Number 3(2017:Jul.)
• Page Start: 678
• Page End: 711
• Publication Date: 2016-06-30
• Subjects: Central bank communication -- Forward guidance -- Inflation targeting -- Interest rate forecasts; Economics -- Periodicals; 330
• DOI: 10.1111/joes.12169
• Languages: English
• ISSNs: 0950-0804

Abstract

Abstract: We discuss the theoretical rationale for central bank communication about future policy rates, either as part of inflation targeting or in the form of forward guidance. We also summarize both actual central bank communication about future policy rates and empirical evidence on the effectiveness of these types of communication. We argue that there is a disconnect between the theory and practice of forward guidance, as theory assumes commitment on the part of 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.