Forward Guidance and Expectation Formation: A Narrative Approach

Christopher Sutherland
"Forward guidance is a central bank statement that provides direct information about the probable state of monetary policy in the future. Its purpose is to influence interest rate expectations. But how exactly does it do so?   To study this issue, I construct central bank data that includes forward guidance and its attributes, central bank projections and quantitative easing, which I then combine with survey data.   I find that, in response to a change in forward...
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