Gauti Eggertsson

Our findings? The data aligns with the model predictions. Major monetary policy regime changes have major effects, so the Forward Guidance Puzzle is perhaps not so puzzling after all. End/

At the end of the day, the question is empirical. We study 4 episodes from the US Great Depression that closely mirror a FGP scenario, using data on long-term yield to approximate the effect of policy announcement about longer duration of the ZLB. 6/

Think of it like a fire: Is it puzzling that a flame grows larger the longer you commit to not extinguishing it? That's essentially the FGP. 5/

This represents a major monetary policy regime change. 4/

The "puzzle" emerges from assuming interest rates are fixed between the announcement today of the future cut, regardless of what happens to output and inflation. 3/

The FGP suggests that future interest rate cuts have bigger effects than current ones. This seems indeed quite puzzling. 2/

The Forward Guidance Puzzle is not a Puzzle Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, an...

Just released a new working paper with brilliant Brown grad student Finn Schüle. While teaching second-year graduate students about the Forward Guidance Puzzle, we came to the conclusion that the FGP was... errr... not very puzzling... 1/
www.nber.org/papers/w33180

Just established this account. I’m hoping there will be a coordinated immigratin from Mordor to what looks like a healtier and sunnier environment. Curious to see if a sucessful coordinated exodus takes place. Would be nice to write without being surrounded by orcs.