Discussion paper

DP13977 Can more public information raise uncertainty? The international evidence on forward guidance

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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Citation

Ehrmann, M, G Gaballo, P Hoffmann and G Strasser (2019), ‘DP13977 Can more public information raise uncertainty? The international evidence on forward guidance‘, CEPR Discussion Paper No. 13977. CEPR Press, Paris & London. https://cepr.org/publications/dp13977