Bank of Israel researchers propose exchange rate-based forward guidance

The Bank of Israel

Forward guidance, particularly in small open economies, would be more credible if linked to external factors such as the exchange rate, according to researchers at the Bank of Israel.

A paper authored by a group of economists in the Bank of Israel's research department examines the experience of other central banks in conducting forward guidance.

"The most important factor in the success of guidance is credibility," the authors say. The success of the policy hinges on its ability to convince the

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