Forward guidance: Communication, commitment, or both?

Forward guidance has been suggested as a form of commitment ("Odyssean") by the policymaker or as a way of conveying information ("Delphic"). I analyze the interaction between households and the central bank as a game in which the central bank sends messages. Without private information, the set of equilibrium payoffs is independent of any announcements: Pure Odyssean forward guidance is redundant. With private information, communication can have social value. Forward guidance is well suited to leverage preexisting credibility to communicate a central bank's private information about its own preferences or beliefs. (C) 2019 Elsevier B.V. All rights reserved.