Can Discounting Alone Resolve the Forward Guidance Puzzle?

Numerically, we examine the expansionary effects of forward guidance at different horizons in Gabaix’s (2020) model and find that the role of discounting is limited and that unrealistic assumptions about parameter calibration are also required to resolve the forward guidance puzzle. We extend Gabaix’s (2020) model to include wage stickiness and find that discounting alone can resolve the puzzle even assuming standard calibration.

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Year of publication:	2022-06-23
Authors:	Ji, Yangyang

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Ji, Yangyang (2022): Can Discounting Alone Resolve the Forward Guidance Puzzle?
Classification:	E12 - Keynes; Keynesian; Post-Keynesian ; E21 - Consumption; Saving ; E23 - Production ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Source:	BASE

Persistent link: https://www.econbiz.de/10015268955