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{"id":14850,"date":"2021-03-20T14:00:49","date_gmt":"2021-03-20T12:00:49","guid":{"rendered":"https:\/\/modecon.mnau.edu.ua\/?p=14850"},"modified":"2021-03-22T14:06:50","modified_gmt":"2021-03-22T12:06:50","slug":"central-bank-communication-forward-guidance","status":"publish","type":"post","link":"https:\/\/modecon.mnau.edu.ua\/en\/central-bank-communication-forward-guidance\/","title":{"rendered":"Sholopak V. Central Bank Communication: Forward Guidance"},"content":{"rendered":"

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JEL Classification<\/strong>: E58<\/i>
\n<\/span><\/td>\n		DOI<\/b>: https:\/\/doi.org\/10.31521\/modecon.V25(2021)-25<\/a><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

[\/vc_column_text][vc_column_text]<\/p>\n

Sholopak Vladyslav<\/b>, Undergraduate Student of the Department of Finance, Ivano-Frankivsk National Technical University of Oil and Gas, Ivano-Frankivsk, Ukraine<\/span><\/p>\n

ORCID ID:<\/strong> 0000-0001-7492-3578<\/a>
\ne-mail:<\/strong> vladsholopak@gmail.com<\/a><\/p>\n

 <\/p>\n

Central Bank Communication: Forward Guidance<\/b><\/h2>\n

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Abstract. Introduction.<\/b> Incomprehension and misinterpretation of central bank actions by the markets lead to uncertainty. As a result, the volatility of inflation, prices, and assets increases. The low-interest-rate in today’s macroeconomic environment is a common thing. In such circumstances, the economy is so difficult to adapt to internal and external shocks, so inefficiencies caused by incorrect or untimely statements by the regulator can exacerbate the problem and provoke unjustified risks. These new conditions have led to changes in the way information is covered and create a new communication approach.<\/span><\/p>\n

Purpose.<\/b> Thus, the article aims to systematize the main patterns of forwarding guidance mechanism as a communication tool in monetary policy. Its use in such developed economies as Japan, the United Kingdom, the United States, and the European Union. Identification of major trends in the use of forwarding guidance form during the crises of 2008 and 2020. Determination of why targets are 2% inflation with the description of monetary and communication tools, research of information coverage approaches.<\/span><\/p>\n

Results.<\/b> The central bank statements affect to decisions of various market participants and can be divided into economic forecasts and forward guidance. According to the forwarding guidance classification, the analysis was made of 2020 statements and compared with the 2008 statements, for each of the studied countries. The finding shows that there has been a shift from economic forecasts to forward guidance. A model consisting of four elements has been identified for the four central banks: target, monetary instruments, statement approach, and information tools.<\/span><\/p>\n

Conclusions<\/b>. In general, new types such as state-contingent and calendar-based statements began to be used during the last crisis. The most common monetary instrument that appears in statements being the interest rate. The common goals for all central banks are to focus on price stability, which is expressed in inflation of 2%. This target must be long-term and in numerical terms to effectively management inflation expectations and bring down volatility. All banks strive for simplicity and clarity in their statements, and they use a wide range of information tools.<\/span><\/p>\n

Keywords:<\/b> central bank communicatio\u0442; forward guidance; non-traditional monetary policy instrument.<\/span><\/p>\n

References:<\/strong><\/p>\n

    \n
  1. European Central Bank. (2020). What is forward guidance? How does it work in practice? Retrieved from <\/span>https:\/\/www.ecb.europa.eu\/explainers\/tell-me\/html\/what-is-forward_guidance.en.html<\/span> [in England].<\/span><\/li>\n
  2. Bundick, B. & Smith, A. (2018). Does Communicating a Numerical Inflation Target Anchor Inflation Expectations? Evidence & Bond Market Implications<\/span>. Federal Reserve Bank of Kansas City Research Working Paper<\/span><\/i> doi:\u00a0<\/span>https:\/\/doi.org\/10.18651\/RWP2018-01<\/span>[in England].<\/span><\/li>\n
  3. Shirai, S. (2013). Bank of Japan Monetary Policy and Forward Guidance in Japan. <\/span>Speeches at the International Monetary Fund<\/span><\/i> and the Board of Governors of the Federal Reserve System.<\/span><\/i> Washington, D.C: Bank of Japan, pp. 1-20 [in England].<\/span><\/li>\n
  4. Federal Reserve System. (2020). What is forward guidance, and how is it used in the Federal Reserve\u2019s monetary policy? Retrieved from <\/span>https:\/\/www.federalreserve.gov\/faqs\/what-is-forward-guidance-how-is-it-used-in-the-federal-reserve-monetary-policy.htm<\/span> [in England].<\/span><\/li>\n
  5. Campbell, J. R.,\u00a0 Evans, Ch. L., Fisher, J. DM & Justiniano, A. (2012). Macroeconomic Effects of Federal Reserve Forward Guidance [with Comments and Discussion].\u00a0<\/span>Brookings Papers on Economic Activity,<\/span><\/i> 1-80 [in England].<\/span><\/li>\n
  6. Ehrmann, M., Gaballo, G., Hoffmann P. & Strasser, G. (2019). Can more public information raise uncertainty? The international evidence on forward guidance.<\/span> Working Paper Series.<\/span><\/i> Retrieved from <\/span>https:\/\/www.ecb.europa.eu\/pub\/pdf\/scpwps\/ecb.wp2263<\/span> ~d433238380.en.pdf [in England].<\/span><\/li>\n
  7. Bank of England. (2013). Monetary Policy Trade-Offs and Forward Guidance. Retrieved from <\/span>https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/inflation-report\/2013\/monetary-policy-trade-offs-and-forward-guidance.pdf<\/span> [in England].<\/span><\/li>\n
  8. Samarina, A. & Apokoritis, N. (2020). Evolution of monetary policy frameworks in the post-crisis environment. <\/span>SSRN Electronic Journal<\/span><\/i>. doi:\u00a0<\/span>10.2139\/ssrn.3515347<\/span> [in England].<\/span><\/li>\n
  9. Bank of England. (2020). Monetary Policy Summary. Retrieved from <\/span>https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/monetary-policy-summary-and-minutes\/2020\/september-2020.pdf<\/span> [in England].<\/span><\/li>\n
  10. \u00a0European Central Bank. (2014). <\/span>Monthly Bulletin<\/span><\/i>, 65-73. Retrieved from <\/span>https:\/\/www.ecb.europa.eu\/pub\/pdf\/mobu\/<\/span> mb201404en.pdf [in England].<\/span><\/li>\n
  11. \u00a0Lane, Ph. (2020). The monetary policy toolbox: evidence from the euro area. <\/span>2020 U.S. Monetary Policy Forum.<\/span><\/i> New York: Initiative on Global Markets at the University of Chicago Booth School of Business [in England].<\/span><\/li>\n
  12. \u00a0Lagarde, Ch. & Guindos, L. (2020). Press Conference. <\/span>Governing Council of the European Central Bank. <\/span><\/i>Frankfurt am Main: European Central Bank [in England].<\/span><\/li>\n
  13. \u00a0Federal Reserve issues FOMC statement. (2020). Retrieved from <\/span>https:\/\/www.federalreserve.gov\/newsevents\/ pressreleases\/monetary20201105a.htm<\/span> [in England].<\/span><\/li>\n
  14. Rudebusch, G. D. & Swanson, E. (2012). The Bond Premium in a DSGE Model with Long-Run Real and Nominal Risks. <\/span>American Economic Journal: Macroeconomics<\/span><\/i>, 4(1), 43-105. doi: 10.1257\/mac.4.1.105 [in England].<\/span><\/li>\n
  15. Bernanke, B. S. (2013). Communication and Monetary Policy. Speech at the National Economists Club Annual Dinner,<\/i> Washington, D.C: Federal Reserve System, pp. 1-18 [in England].<\/li>\n<\/ol>\n

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    [\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]Received:<\/strong> 14 February 2021<\/span><\/p>\n

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    [vc_row][vc_column][vc_column_text] JEL Classification: E58 DOI: https:\/\/doi.org\/10.31521\/modecon.V25(2021)-25 [\/vc_column_text][vc_column_text] Sholopak Vladyslav, Undergraduate Student of the Department of Finance, Ivano-Frankivsk National Technical University of Oil and Gas, Ivano-Frankivsk, Ukraine ORCID ID: 0000-0001-7492-3578 e-mail: vladsholopak@gmail.com   Central Bank Communication: Forward Guidance   Abstract. Introduction. Incomprehension and misinterpretation of central bank actions by the markets lead to uncertainty. As a
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