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Author: Jeffrey R. Campbell Publisher: ISBN: Category : Languages : en Pages : 60
Book Description
A large output gap accompanied by stable inflation close to its target calls for further monetary accommodation, but the zero lower bound on interest rates has robbed the Federal Open Market Committee (FOMC) of the usual tool for its provision. We examine how public statements of FOMC intentions -- forward guidance -- can substitute for lower rates at the zero bound. We distinguish between Odyssean forward guidance, which publicly commits the FOMC to a future action, and Delphic forward guidance, which merely forecasts macroeconomic performance and likely monetary policy actions. Others have shown how forward guidance that commits the central bank to keeping rates at zero for longer than conditions would otherwise warrant can provide monetary easing, if the public trusts it. We empirically characterize the responses of asset prices and private macroeconomic forecasts to FOMC forward guidance, both before and since the recent financial crisis. Our results show that the FOMC has extensive experience successfully telegraphing its intended adjustments to evolving conditions, so communication difficulties do not present an insurmountable barrier to Odyssean forward guidance. Using an estimated dynamic stochastic general equilibrium model, we investigate how pairing such guidance with bright-line rules for launching rate increases can mitigate risks to the Federal Reserve's price stability mandate.
Author: Jeffrey R. Campbell Publisher: ISBN: Category : Languages : en Pages : 60
Book Description
A large output gap accompanied by stable inflation close to its target calls for further monetary accommodation, but the zero lower bound on interest rates has robbed the Federal Open Market Committee (FOMC) of the usual tool for its provision. We examine how public statements of FOMC intentions -- forward guidance -- can substitute for lower rates at the zero bound. We distinguish between Odyssean forward guidance, which publicly commits the FOMC to a future action, and Delphic forward guidance, which merely forecasts macroeconomic performance and likely monetary policy actions. Others have shown how forward guidance that commits the central bank to keeping rates at zero for longer than conditions would otherwise warrant can provide monetary easing, if the public trusts it. We empirically characterize the responses of asset prices and private macroeconomic forecasts to FOMC forward guidance, both before and since the recent financial crisis. Our results show that the FOMC has extensive experience successfully telegraphing its intended adjustments to evolving conditions, so communication difficulties do not present an insurmountable barrier to Odyssean forward guidance. Using an estimated dynamic stochastic general equilibrium model, we investigate how pairing such guidance with bright-line rules for launching rate increases can mitigate risks to the Federal Reserve's price stability mandate.
Author: Herman Royer Professor of Political Economy David H Romer Publisher: Brookings Institution Press ISBN: 0815724322 Category : Business & Economics Languages : en Pages : 423
Book Description
"Brookings Papers on Economic Activity" (BPEA) provides academic and business economists, government officials, and members of the financial and business communities with timely research on current economic issues. Contents - Democratic Change in the Arab World, Past and Present Eric Chaney (Harvard University) - Disentangling the Channels of the 2007-2009 Recession James Stock (Harvard University) and Mark Watson (Princeton University) - Macroeconomic Effects of FOMC Forward Guidance Jeffrey Campbell, Charles Evans, Jonas Fisher, and Alejandro Justiniano (Federal Reserve Bank of Chicago) - Is the Debt Overhang Holding Back Consumption? Karen Dynan (Brookings Institution) - The Euro's Three Crises Jay Shambaugh (Georgetown University) - Fiscal Policy in a Depressed Economy J. Bradford DeLong (University of California-Berkeley) and Lawrence Summers (Harvard University )
Author: Eric T. Swanson Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
I separately identify and estimate the effects of the Federal Reserve's federal funds rate, forward guidance, and large-scale asset purchase (LSAP) policies on the U.S. economy. I extend the high-frequency identification strategy of Bauer and Swanson (2023b) for monetary policy VARs by allowing each of the above policies to have possibly different economic effects. I follow Swanson (2021) and Swanson and Jayawickrema (2023) to separately identify federal funds rate, forward guidance, and LSAP components of monetary policy announcements using high-frequency interest rate changes around FOMC announcements, post- FOMC press conferences, FOMC meeting minutes releases, and speeches and testimony by the Fed Chair and Vice Chair. I find that changes in the federal funds rate have had the most powerful effects on the U.S. economy, followed by forward guidance and, lastly, LSAPs.
Author: Board of Governors of the Federal Reserve System Publisher: ISBN: 9780894991967 Category : Banks and Banking Languages : en Pages : 0
Book Description
Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
Author: Juan Angel Garcia Publisher: International Monetary Fund ISBN: 1484363019 Category : Business & Economics Languages : en Pages : 59
Book Description
Do euro area inflation expectations remain well-anchored? This paper finds that the protracted period of low (and below-target) inflation in the euro area since 2013 has weakened their anchoring. Testing their sensitivity to inflation and macroeconomic news, this paper expands existing results in two key dimensions. First, by analyzing all available (advanced) inflation releases. Second, the reactions of expectations are investigated at daily, time-varying and intraday frequency regressions to add robustness to our conclusions. Results point to a significant impact of inflation news over recent years that had not been observed before in the euro area.
Author: Peter J. N. Sinclair Publisher: Routledge ISBN: 1135179778 Category : Business & Economics Languages : en Pages : 402
Book Description
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author: Callum Jones Publisher: International Monetary Fund ISBN: 1484353552 Category : Business & Economics Languages : en Pages : 43
Book Description
After 2007, countries that cut their policy interest rates close to zero turned, among other policies, to forward guidance. We estimate a two-country model of the U.S. and Canada to quantify how unexpected changes in U.S. forward guidance affected Canada. Expansionary U.S. forward guidance shocks, like conventional policy shocks, are beggar-thy-neighbor and depress Canadian output, but by twice as much as conventional shocks. We find that the effect of U.S. forward guidance shocks on Canadian output, unlike conventional policy shocks, depends on the state of U.S. demand and can be five times smaller when U.S. demand is weak.
Author: Jeffrey R. Campbell
Author: Jeffrey R. Campbell
Author: Herman Royer Professor of Political Economy David H Romer
Author: Eric T. Swanson
Author: Board of Governors of the Federal Reserve System
Author: Matthew D. Raskin
Author: Juan Angel Garcia
Author: Eric M. Engen
Author: Brent Bundick
Author: Peter J. N. Sinclair
Author: Callum Jones