Citation

Discussion Paper Details

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Title: Can more public information raise uncertainty? The international evidence on forward guidance

Author(s): Michael Ehrmann, Gaetano Gaballo, Peter Hoffmann and Georg Strasser

Publication Date: September 2019

Keyword(s): central bank communication, disagreement, forward guidance, heterogeneous beliefs and Macroeconomic news

Programme Area(s): Monetary Economics and Fluctuations

Abstract: Central banks have used different types of forward guidance. This paper reports cross-country evidence showing that, in general, forward guidance mutes the response of government bond yields to macroeconomic news. However, calendar-based guidance with a short horizon counter-intuitively raises it. Using a stylized model where agents learn from market signals, it shows that the public release of more precise information about future rates lowers the informativeness of market signals and, as a consequence, may increase uncertainty and amplify the reaction of expectations to macroeconomic news.

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Bibliographic Reference

Ehrmann, M, Gaballo, G, Hoffmann, P and Strasser, G. 2019. 'Can more public information raise uncertainty? The international evidence on forward guidance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13977