Threshold-based forward guidance can work at the zero lower bound, BoE paper says
Bank of England working paper documents success of threshold-based forward guidance
Threshold-based forward guidance (TBFG) can improve outcomes at the zero lower bound as a "lower-for-longer" policy, a Bank of England (BoE) working paper has found.
Threshold-based forward guidance: hedging the zero lower bound, by Lena Boneva, Richard Harrison and Matt Waldron, uses a New Keynesian model to see if TBFG can be used temporarily at the zero lower bound to stimulate the economy without creating time inconsistency.
The authors note that TBFG can be successful if the policy-maker
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