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dc.contributor.author
Gersbach, Hans
dc.contributor.author
Liu, Yulin
dc.contributor.author
Tischhauser, Martin
dc.date.accessioned
2021-03-10T08:44:22Z
dc.date.available
2018-01-03T12:41:48Z
dc.date.available
2018-02-16T09:06:43Z
dc.date.available
2021-03-10T08:44:22Z
dc.date.issued
2018-01
dc.identifier.issn
0265-8003
dc.identifier.uri
http://hdl.handle.net/20.500.11850/225155
dc.description.abstract
We examine how forward guidance should be designed when an economy faces negative natural real interest-rate shocks and subsequent supply shocks. Besides a standard approach for forward guidance, we introduce two flexible designs: escaping and switching. With escaping forward guidance, the central banker commits to low interest rates in the presence of negative natural real interest-rate shocks, contingent on a self-chosen inflation rate threshold. With switching forward guidance, the central banker can switch from interest-rate forecasts to inflation forecasts any time in order to stabilize supply shocks. We show that for small and large natural real interest-rate shocks, escaping forward guidance is preferable to any of the other approaches, while switching forward guidance is optimal for intermediate natural real interest-rate shocks. Furthermore, with the polynomial chaos expansion method, we show that our findings are globally robust to parameter uncertainty. In addition, using Sobol' Indices, we identify the structural parameters with the greatest effect on the results.
en_US
dc.language.iso
en
en_US
dc.publisher
Centre for Economic Policy Research
en_US
dc.subject
Central banks
en_US
dc.subject
Forward guidance
en_US
dc.subject
Global robustness
en_US
dc.subject
Poynomial chaos expansion
en_US
dc.subject
Sobol' indices
en_US
dc.subject
Transparency
en_US
dc.subject
Zero lower bound
en_US
dc.title
Versatile Forward Guidance: Escaping or Switching?
en_US
dc.type
Working Paper
ethz.journal.title
CEPR Discussion Papers
ethz.pages.start
DP12559
en_US
ethz.size
63 p.
en_US
ethz.code.jel
E3 - Prices, Business Fluctuations, and Cycles::E31 - Price Level; Inflation; Deflation
en_US
ethz.code.jel
E4 - Money and Interest Rates::E49 - Other
en_US
ethz.code.jel
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit::E52 - Monetary Policy
en_US
ethz.code.jel
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit::E58 - Central Banks and Their Policies
en_US
ethz.publication.place
London
en_US
ethz.publication.status
published
en_US
ethz.leitzahl
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.::03729 - Gersbach, Hans / Gersbach, Hans
en_US
ethz.leitzahl.certified
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.::03729 - Gersbach, Hans / Gersbach, Hans
en_US
ethz.identifier.url
https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12559
ethz.relation.isPreviousVersionOf
handle/20.500.11850/499530
ethz.date.deposited
2018-01-03T12:41:49Z
ethz.source
FORM
ethz.eth
yes
en_US
ethz.availability
Metadata only
en_US
ethz.rosetta.installDate
2018-02-16T09:06:48Z
ethz.rosetta.lastUpdated
2022-03-29T05:41:12Z
ethz.rosetta.versionExported
true
ethz.COinS
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