Heterogeneous beliefs may weaken effect of forward guidance, paper argues
Federal Reserve’s policy of fixed-date forward guidance helped move expectations
Market expectations of interest rates converged when the Federal Reserve introduced "fixed-date" forward guidance, a working paper published this week by the Banque de France argues. Heterogeneous beliefs among private agents, however, can still weaken the effect of forward guidance, the paper says.
In Forward guidance and heterogeneous beliefs, Phillippe Andrade, Gaetano Gaballo, Eric Mengus and Benoit Mojon present a new set of stylised facts which they say capture disagreement among US market
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