Communication About Future Policy Rates in Theory and Practice: A Survey

Moessner, Richhild; Jansen, David‐Jan; Haan, Jakob de

doi:10.2139/ssrn.2616605

Cited by 17 publications

(24 citation statements)

References 46 publications

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“…Ambiguity about past and planned amounts of FX intervention and desired exchange rates may help a central bank counter or prevent coordinated speculative attacks. This is in contrast to communication about the monetary policy framework in the form of an inflation target, and in contrast to communication about the policy rate (for surveys, see Blinder, Ehrmann, Fratzscher, de Haan, & Jansen, ; Moessner, Jansen, & De Haan, ), where no such adverse effects from speculative attacks are present.…”

Section: Snb Foreign Exchange Interventionsmentioning

confidence: 90%

Informal one‐sided target zone model and the Swiss franc

Chen

Funke²,

Moessner

2018

Rev International Economics

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This paper develops a new theoretical model with an asymmetric informal one-sided exchange rate target zone, with an application to the Swiss franc following the removal of the minimum exchange rate of CHF 1.20 per euro in January 2015. We extend and generalize a standard target zone model by introducing perceived uncertainty about the lower edge of the band. We find that informal soft edge target zone bands lead to weaker honeymoon effects, wider target zone ranges, and higher exchange rate volatility than formal target zone bands. These results suggest that it would be beneficial for exchange rate policy intentions to be stated clearly in order to anchor exchange rate expectations and reduce exchange rate volatility. We also study how exchange rate dynamics can be characterized in models in which financial markets are aware of occasional changes in the policy regime. We show that expected changes in the central bank's exchange rate policy may lead to exchange rate oscillations, providing an additional source of exchange rate volatility, and to capture this it is important to take into account the possibility of regime changes in exchange rate policy.

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Section: Snb Foreign Exchange Interventionsmentioning

confidence: 90%

Informal one‐sided target zone model and the Swiss franc

Chen

Funke²,

Moessner

2018

Rev International Economics

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“…Moessner et al . () suggest that central banks do not make commitments of the kind that is discussed in theory. Precisely because of the conditionality of the language used by central banks, there have been concerns that UMP may impair any hard‐won credibility that central banks had prior to the GFC.…”

Section: The International Evidence To Date: Financial Marketsmentioning

confidence: 99%

“…For more details on FG policies, refer to Moessner et al . (), who examine whether central banks actually make commitments in practice, and Charbonneau and Rennison ().…”

Section: The Transition To Unconventional Policiesmentioning

confidence: 99%

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

Lombardi¹,

Siklos

Amand

2018

Journal of Economic Surveys

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This study examines the effectiveness of unconventional monetary policies (UMP). It considers whether these policies have been successful and where their effects remain uncertain. We survey both the domestic financial market and macro‐economic effects of UMP in the economies where these policies were introduced and their international spillover effects. The paper considers the impact of a wide range of UMP rather than the effects of specific policy instruments. We also provide a retrospective on the important case of Japan beginning in the late1990s and ask whether the Eurozone's experience with UMP is substantively different given its structure of policymaking. Finally, we ask: if the ‘old normal’ is not in our future, should the ‘new normal’ in monetary policy routinely include what we now refer to as UMP? We conclude that UMP can prevent economic collapse but are not designed to promote stronger long‐term economic growth. Apart from new communication strategies, the use of UMP under normal circumstances does not appear to be a sound monetary policy strategy. Failure to learn this lesson might also enable future policy makers to ask or expect too much from their central banks.

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“…In practice, such guidance has been more directed to better communication of central banks’ reaction functions – what is sometimes referred to as ‘Delphic’ guidance – rather than an ‘Odyssean’ attempt to implement a time‐inconsistent policy path (Moessner et al ). Certainly that was the intention of the guidance introduced by the Monetary Policy Committee (MPC) in August 2013, which linked even the mere contemplation of a policy rate increase to unemployment falling to at least 7 per cent so as to pre‐empt a premature rise in market interest rates.…”

Section: The Implications For Monetary Policymentioning

confidence: 99%

Central Banking after the Great Recession

Bean¹

2018

Economic Affairs

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Communication About Future Policy Rates in Theory and Practice: A Survey

Cited by 17 publications

References 46 publications

Informal one‐sided target zone model and the Swiss franc

Informal one‐sided target zone model and the Swiss franc

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

Central Banking after the Great Recession

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