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

Gaetano Gaballo, Michael Ehrmann, Peter Hoffmann and Georg Strasser

No 13977, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Central bank communication; Heterogeneous beliefs; Forward guidance; Disagreement; Macroeconomic news (search for similar items in EconPapers)
JEL-codes: D83 E43 E52 E58 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (48)

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Journal Article: Can more public information raise uncertainty? The international evidence on forward guidance (2019)
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