Forward guidance matters: Disentangling monetary policy shocks

Central banks have usually employed short-term rates as the main instrument of monetary policy. In last decades, however, forward guidance has also become a central tool. This paper combines two sources extraneous information - high frequency surprises and narrative evidence with sign restrictions in structural vector autoregressive (VAR) model to disentangle from conventional Results show that policy expected effects on industrial production even recent US sample is an effective tool, being at least strong