We quantify the macroeconomic effects of interest rate forward guidance in an estimated medium-scale two-agent New … Keynesian (TANK) model. In general, such models can dampen or amplify the power of forward guidance compared to a representative ….An interaction with asset purchases gives rise to non-linear effects that depend on the horizon of forward guidance. …

We compare the causal effects of forward guidance communication about future interest rates on households' expectations … macroeconomic variables jointly and the non-response to long-run forward guidance is consistent with models in which agents have …

A common finding in the literature is that forward guidance cannot be credible under discretionary policy as long as … possible. In this paper, we contribute to this new result and assess the sustainability of forward guidance under the cost … channel. We find that forward guidance can be sustainable under the cost channel. However, we show that it is less credible …

dissipated. Hence forward guidance continues to play an important role in increasing the effectiveness of stabilization policy …