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Central Bank Communication and Disagreement about the Natural Rate Hypothesis

Carola Binder

International Journal of Central Banking2021article
AJG 3ABDC A
Weight
0.56

Abstract

About half of professional forecasters report that they use the natural rate of unemployment (u∗) to forecast. I show that forecasters' reported use of and estimates of u∗ are informative about their expectations-formation process, including their use of a Phillips curve. Those who report not using u∗ have higher and less anchored inflation expectations, and seem to have found the Federal Reserve's state-based forward guidance less credible. The Federal Open Market Committee (FOMC) publishes participants' projections of longer-run unemployment in the Summary of Economic Projections. I document how and when the FOMC participants have disagreed with each other and with the private sector, discussing possible sources of disagreement and implications for credibility.

6 citations

Cite this paper

@article{carola2021,
  title        = {{Central Bank Communication and Disagreement about the Natural Rate Hypothesis}},
  author       = {Carola Binder},
  journal      = {International Journal of Central Banking},
  year         = {2021},
}

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Central Bank Communication and Disagreement about the Natural Rate Hypothesis

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Evidence weight

0.56

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.53 × 0.4 = 0.21
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.