Forward Guidance and Durable Goods Demand
Durable goods attenuate the power of forward guidance. The extensive and intensive margins of durable goods demand are both more sensitive to the contemporaneous user cost than to future user costs. Changes in the contemporaneous real interest rate directly affect the contemporaneous user cost and durable demand, whereas promises of low future real interest rates have weaker effects through equilibrium price changes. Quantitatively, reducing the real interest rate one year from now increases output by only forty percent as much as reducing the real interest rate today. Our results are little affected by the maturity of financial assets that finance durable purchases.
Published Versions
Alisdair McKay & Johannes F. Wieland, 2022. "Forward Guidance and Durable Goods Demand," American Economic Review: Insights, vol 4(1), pages 106-122. citation courtesy of 
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