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  • LancasterWP2022_003

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Forward guidance shocks

Research output: Working paper

Publication date23/03/2022
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
Number of pages42
<mark>Original language</mark>English

Publication series

NameEconomics Working Papers Series


I estimate the effects of a forward guidance (FG) shock and compare it with a
traditional monetary policy (MP) shock. I find that FG shocks have smaller effects
on macroeconomic aggregates than MP shocks. Structural identification is reached
by a novel heteroscedascticity-based approach that exploits (i) the introduction of the forward guidance in the form of a published policy-rate path in the US in January 2012; and (ii) the zero lower bound (ZLB) constraints. My findings are consistent with the predictions of the latest theories about the FG puzzle.