Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/178679
Authors: 
Gerke, Rafael
Giesen, Sebastian
Kienzler, Daniel
Year of Publication: 
2018
Series/Report no.: 
Bundesbank Discussion Paper 12/2018
Abstract: 
After hitting the lower bound on interest rates, the Eurosystem engaged in a public sector purchase programme (PSPP) and forward guidance (FG). We use prior and posterior predictive analysis to evaluate the importance of parameter uncertainty in an analysis of these policies. We model FG as an anticipated temporary interest rate peg. The degree of parameter uncertainty is considerable and increasing in the length of FG. The probability of being able to reset prices and wages is the most important factor driving uncertainty about inflation. In contrast, variations in financial intermediaries' net worth adjustment costs have little impact on in ation outcomes.
Subjects: 
prior/posterior predictive analysis
anticipated interest rate peg
parameter uncertainty
euro area
QE
PSPP
forward guidance puzzle
JEL: 
C53
E32
E52
ISBN: 
978-3-95729-449-4
Document Type: 
Working Paper
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