Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247181 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 912
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
Central banks have usually employed short-term rates as the main instrument of monetary policy. In the last decades, however, forward guidance has also become a central tool for monetary policy. In an innovative way this paper combines two sources of extraneous information - high frequency surprises and narrative evidence - with sign restrictions in a structural vector autoregressive (VAR) model to fully disentangle the effects of forward guidance shocks from the effects of conventional monetary policy shocks. Results show that conventional monetary policy has the expected effects even in a recent US sample, in contrast with the evidence reported by Barakchian and Crowe (2013) and Ramey (2016), and that forward guidance is an effective policy tool. In fact, it is at least as strong as conventional monetary policy
Subjects: 
Forward Guidance
Monetary Policy
Narrative Sign Restrictions
High-frequency identification
JEL: 
E30
E32
E43
E52
E58
C11
C50
Document Type: 
Working Paper

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