Kansas Fed researchers bridge gap between forward guidance data and theory
Working paper tests theoretical model against empirical findings
Researchers at the Federal Reserve Bank of Kansas City suggest dynamic equilibrium models, featuring both nominal and real rigidities, are "useful" in examining the impact of forward guidance at the zero lower bound.
In The Dynamic Effects of Forward Guidance Shocks, Brent Bundick and Andrew Smith note theoretical and empirical research has tended to be "divided" on the effects of forward guidance.
The authors aim to bridge the gap. First, they identify the empirical effects of the introduction
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