Monetary Policy Inclinations |
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Authors: | HANS GERSBACH VOLKER HAHN |
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Institution: | 1. Hans Gersbach is at CER‐ETH, Center of Economic Research at ETH Zurich (E‐mail: hgersbach@ethz.ch);2. Volker Hahn is at CER‐ETH, Center of Economic Research at ETH Zurich (E‐mail: vhahn@ethz.ch). |
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Abstract: | We examine whether central banks should complement their inflation forecasts with interest rate projections. Introducing a central bank loss function that accounts for deviations from announcements, we incorporate the publication of policy inclinations into a dynamic monetary model. We show that in the presence of cost‐push shocks, the publication of interest rate forecasts tends to improve welfare. |
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Keywords: | E58 central banks transparency Federal Reserve ECB policy inclinations |
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