Forward guidance with an escape clause : when half a promise is better than a full one

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Borradores de Economía; No. 811
Date published
2014-03-03
Date of last update
2014-03-03
Author
Florez-Jimenez, Maria Lucia
Parra-Polanía, Julián Andrés
Document language
spa
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Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva.
Abstract
Using a three-equation New Keynesian model we find that incorporating an escape clause (EC) into Forward Guidance (FG) is welfare improving as it allows the monetary authority to avoid cases in which the cost of reduced flexibility is too high. The EC pro
JEL Codes
E47 - Money and Interest Rates: Forecasting and Simulation: Models and ApplicationE58 - Central Banks and Their PoliciesE52 - Monetary Policy
Keywords
Forward guidance ; Escape clause ; Zero lower bound ; Central bank communication ;
URI
https://repositorio.banrep.gov.co/handle/20.500.12134/6097
https://hdl.handle.net/20.500.12134/6097
https://doi.org/10.32468/be.811
https://ideas.repec.org/p/bdr/borrec/811.html
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This work is licensed under a Creative Commons Reconocimiento-NoComercial 4.0.This document has been deposited by the author (s) under the following certificate of deposit