Dutch paper says theory of forward guidance must catch up with practice

netherlands-bank-2
The Netherlands Bank

There is a "disconnect" between the theory and practice of forward guidance, according to economists at the Netherlands Bank – with the gap stemming from central banks' reluctance to commit to a given interest rate path.

In a working paper published on June 10, Richhild Moessner, David-Jan Jansen and Jakob de Haan distinguish between "Delphic" and "Odyssean" communication. The former is a forecast, the latter a commitment.

Theoretical literature focuses on the ability of central banks to influen

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