Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/306368 
Year of Publication: 
2024
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 12/2024
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We show that sacrifice ratios associated with announcements of the most likely course of monetary policy are lower when the implementation date is further out into the future in the basic New Keynesian framework. This is not due to forward guidance puzzle effects and holds even when agents' expectations feature cognitive discounting. Nevertheless, the rate at which sacrifice ratios fall with the implementation horizon is attenuated by the intensity of cognitive discounting. We also show that our results also hold in a model with additional real and nominal rigidities. These results indicate that telegraphing the most likely course of action for monetary policy attenuates the effects on output relative to inflation.
Subjects: 
monetary policy announcements
sacrifice ratio
cognitive discounting
JEL: 
E31
E52
E58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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