Forward Guidance as a Monetary Policy Rule
June 27, 2016
Mitsuru Katagiri*
Abstract
Many central banks implement forward guidance according to an implicit or explicit policy rule in practice, and thus it is expected to influence the economy by changing expectations formation of private agents. In this paper, I investigate the effects of forward guidance particularly via expectations formation by formulating forward guidance as a monetary policy rule in a non-linear new Keynesian model. A quantitative analysis using the U.S. and Japanese data implies that a rule-based forward guidance significantly mitigates a decline in inflation and output growth in a crisis period via changing expectations formation.
- Research and Statistics Department, Bank of Japan
E-mail : mitsuru.katagiri@boj.or.jp
Notice
Papers in the Bank of Japan Working Paper Series are circulated in order to stimulate discussion and comments. Views expressed are those of authors and do not necessarily reflect those of the Bank.
If you have any comment or question on the working paper series, please contact each author.
When making a copy or reproduction of the content for commercial purposes, please contact the Public Relations Department (post.prd8@boj.or.jp) at the Bank in advance to request permission. When making a copy or reproduction, the source, Bank of Japan Working Paper Series, should explicitly be credited.