Has Forward Guidance Been Effective--论文代写范文精选

极低利率的持续时间可能被视为一种修正的预测。因此,提出来可能会减少经济景气,。这篇经济essay代写范文表明,自2008年以来,在过去有类似的对经济的影响。

Since 2008, the Federal Reserve has relied on unconventional policy measures to fulfill its dual mandate. These unconventional tools became necessary when the effective lower bound on nominal rates prevented further cuts in the target federal funds rate. One such tool used in the aftermath of the Great Recession has been forward guidance, which is communication about the future path of policy rates. But has forward guidance, as recently practiced by the Federal Open Market Committee (FOMC), been effective? Economists have yet to reach a consensus on whether forward guidance is an effective substitute for changes in the target federal funds rate. Forward guidance is similar to conventional policy in that it provides information about short-term interest rates which affect broader interest rates that influence spending by consumers and businesses. However, forward guidance differs from conventional policy in that it carries a greater risk of being misinterpreted (Woodford). 

Statements that extend the duration of exceptionally low rates may be perceived as a revised forecast of a bleaker economic outlook. Consequently, forward guidance may actually reduce economic sentiment and, in turn, lower aggregate demand. This article shows that forward guidance, as practiced by the FOMC since 2008, has had similar effects on the economy as past changes in the target federal funds rate. Policy guidance signaling that the federal funds rate would remain lower in the future than previously expected has led to increases in employment and prices. Moreover, the peak effects on employment and prices following a typical forward guidance announcement are quantitatively similar to those that followed a typical change in the effective federal funds rate before the zero lower bound became a binding constraint on conventional policy. 

One caveat to these conclusions is that our empirical analysis is unable to disentangle the relative contribution of quantitative easing (QE) from the estimated effects of forward guidance. Woodford, among others, suggests QE acts as a signal to the public affirming the FOMC’s commitment to its interest rate guidance. Increases in QE may have therefore played an integral role in generating the estimated stimulatory effects of guidance about lower future rates. This is especially plausible since the FOMC statements and transcripts analyzed in this article illustrate that some members of the Committee were hesitant to make policy commitments that would constrain monetary policy in the future. Section I reviews various channels through which forward guidance can influence economic activity and documents the FOMC’s intent behind its recent forward guidance. Section II presents evidence that FOMC forward guidance about lower future rates increases employment and prices and compares these estimates with the effects of changes in the effective federal funds rate prior to the zero lower bound period. Section III concludes with a discussion of the limits of forward guidance as a tool to stimulate the economy when the federal funds rate is constrained by the zero lower bound. I. 

How Can Forward Guidance Affect the Economy? 
Conventional monetary policy primarily influences the economy through its effects on interest rates. A change in the target federal funds rate, which was the primary focus of policy deliberations prior to 2008, shifts the expectations of future monetary policy which, in turn, affect long-term interest rates. These long-term interest rates, such as those on auto loans and mortgages, are most relevant to households’ spending decisions. Through this channel, then, a reduction in the target federal funds rate is able to promote spending in the economy and thus increase price pressures for firms as they begin to use resources more intensively to meet the higher demand. When the federal funds rate is fixed at its effective lower bound, however, reductions in the target overnight interest rate can no longer be used to generate this economic stimulus. 

Forward guidance is thought to operate through a similar interest rate channel but doesn’t require a change in the current target federal funds rate. FOMC statements that policy rates will remain exceptionally low in the future can reduce both components of long-term rates—the term premium and the expected path of future interest rates. This type of policy guidance reduces the term premium by reducing the risk of future policy rates unexpectedly increasing. Consequently, investors buying a long-term bond will require a lower term premium, which is the additional compensation they require to bear the risk of future shortterm rates differing from their expected path. A lower term premium can stimulate the economy by lowering the credit premium on private debt, which decreases borrowing costs for businesses and households.1 

Forward guidance can also lower long-term interest rates by lowering the expected path of short-term interest rates. Past policy actions suggest that when the economy slows, the Federal Reserve will lower future policy rates to stabilize the economy. When the policy rate is at its effective lower bound, however, future policy rates can’t be lowered further. Instead, the FOMC can issue statements about how long the target federal funds rate will remain exceptionally low. If the announced duration of low interest rates is longer than the public expects, a fall in the future path of interest rates then causes an immediate decline in longer-term rates. But whether this change in policy stimulates the economy depends on how the public interprets the forward guidance. 

Forward guidance in theory and in practice 
In theory, forward guidance about a lower path of future policy rates can be classified as either a policy commitment or a forecast of future policy rates. For example, FOMC statements about low future policy rates could be a commitment to provide future accommodation when policy is otherwise constrained by the zero lower bound. Such promises of more accommodative monetary policy in the future can create a boom in economic activity. Businesses may seek to take advantage of a future boom by hiring more employees to prepare for higher future demand. In this sense, the boom can become self-fulfilling and lead to a more robust economic recovery. These stimulatory effects can be achieved as long as the forward guidance is perceived as a credible commitment and the path of future interest rates is lower than expected prior to the announcement. But policy guidance about low future policy rates might also simply reflect the Committee’s forecast for the U.S. economy. 

FOMC forecasts of low future rates may have some stimulatory effect by making future monetary policy more transparent, but the full effects are less clear. To the extent private-sector forecasts align with those of the FOMC, policy guidance does not reveal new information about macroeconomic fundamentals. But if the public places a great deal of trust in the FOMC’s macroeconomic forecast, a forecast of future policy rates that is lower than the public anticipated could inadvertently paint a pessimistic picture of the economic outlook. In this case, forecastbased forward guidance may be counterproductive by decreasing consumer sentiment and, in turn, discouraging consumers from making big-ticket purchases. While classifying forward guidance as either a commitment or a forecast is useful in theory, forward guidance as practiced by the FOMC since 2008 may not fit neatly in either category. In the words of former Philadelphia Fed President Charles Plosser, “the FOMC has not been clear about the purpose of its forward guidance. Is it purely a transparency device, or is it a way to commit to a more accommodative future policy stance to add more accommodation today?” 

Intent and perceptions of FOMC forward guidance 

FOMC meeting transcripts may shed some light on the intent behind the Committee’s recent use of forward guidance. Dialogue from the FOMC’s December 2008 meeting suggests the Committee issued forward guidance statements that were intended to provide accommodation but not necessarily a commitment. Although FOMC members wanted to communicate their intention to keep rates low to support the economic recovery, they seemed hesitant to restrict their ability to react to future economic conditions. Former Kansas City Fed President Thomas Hoenig described the Committee’s trade-off: “In general, I think that it is difficult to construct a very specific statement that is credible to markets and does not unduly tie the hands of this Committee”(FOMC 2008, 56) For this reason, the FOMC sought to balance the economic benefits of committing to accommodation with the potential risks associated with constraining future monetary policy. 

To allow the FOMC flexibility while still influencing expectations for the future path of interest rates, the Committee chose to issue “more-general rather than more-specific … statements” (FOMC 2008, 56). Then-Chairman Bernanke described the resulting December 2008 forward guidance statement as “a forecast of policy rather than a commitment to policy, but [one that provides] some information about the Committee’s expectations and should affect market rates” (25). Evidently, the Committee understood that despite their reluctance to commit to future policy actions, effective forward guidance required altering the market’s expectations for the path of future rates. 

The FOMC’s forward guidance appears to have been successful in this respect. Table 1 reviews how the price of interest rate futures contracts changed in reaction to major forward guidance announcements during the zero lower bound period. While the FOMC had used forward guidance to indicate future monetary policy actions before 2008, the zero lower bound period marks the first use of policy guidance when the federal funds rate could not be lowered further.2 During this period, the communication challenges of implementing forward guidance were considerably more difficult. Despite not being able to use conventional policy measures in tandem with forward guidance, the FOMC was able to affect market interest rates in a manner largely consistent with their statement’s policy guidance. The first two forward guidance statements from the FOMC during the zero lower bound period qualitatively described the length of time for which the target federal funds rate would remain exceptionally low. 

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