The redistributive effects of forward guidance

Seungjun Baek

doi:10.1016/j.econlet.2019.06.008

The redistributive effects of forward guidance

Seungjun Baek

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

We examine the redistributive effects of forward guidance under the zero lower bound. We show that the effects of forward guidance depend on savers’ asset positions and the nature of financial frictions. If borrowers are constrained on the issuance of new debt, savers’ wealth is exposed to future inflation and real interest rates. In some cases, a negative wealth effect is strong in that forward guidance cannot mitigate recession.

Original language	English
Pages (from-to)	118-121
Number of pages	4
Journal	Economics Letters
Volume	182
DOIs	https://doi.org/10.1016/j.econlet.2019.06.008
Publication status	Published - Sept 2019

Bibliographical note

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

Financial friction
Forward guidance
Monetary policy
Redistribution
Zero lower bound

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10.1016/j.econlet.2019.06.008

Cite this

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title = "The redistributive effects of forward guidance",

abstract = "We examine the redistributive effects of forward guidance under the zero lower bound. We show that the effects of forward guidance depend on savers{\textquoteright} asset positions and the nature of financial frictions. If borrowers are constrained on the issuance of new debt, savers{\textquoteright} wealth is exposed to future inflation and real interest rates. In some cases, a negative wealth effect is strong in that forward guidance cannot mitigate recession.",

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AB - We examine the redistributive effects of forward guidance under the zero lower bound. We show that the effects of forward guidance depend on savers’ asset positions and the nature of financial frictions. If borrowers are constrained on the issuance of new debt, savers’ wealth is exposed to future inflation and real interest rates. In some cases, a negative wealth effect is strong in that forward guidance cannot mitigate recession.

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KW - Forward guidance

KW - Monetary policy

KW - Redistribution

KW - Zero lower bound

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DO - 10.1016/j.econlet.2019.06.008

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VL - 182

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EP - 121

JO - Economics Letters

JF - Economics Letters

ER -

The redistributive effects of forward guidance

Abstract

Bibliographical note

Keywords

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