BoJ paper models impact of guidance on expectations
Announcing forward guidance before reaching the effective lower bound can help to “positively influence” inflation and output growth, the author finds
Rule-based forward guidance (FG) "significantly mitigates a decline in inflation and output growth in a crisis", according to a working paper published by the Bank of Japan today (June 27).
In Forward Guidance as a Monetary Policy Rule, Mitsuru Katagiri finds the central bank can influence inflation and output growth by changing the expectations of private agents. This applies both at and before reaching the effective lower bound (ELB).
The author's results imply "the central bank can positively
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