Questions about the Forward Guidance Puzzle Paper

Hello everyone,

I am not sure if I understand the Figure 6 in the forward guidance puzzle by Del Negro et al (2017, version 9, but older versions also work) correctly. I guess one way to produce these impulse responses is to modify the sample code by professor Pfeifer (RBC_news_shock_model.mod).

  1. I think that the zero quarters ahead panel of the figure should correspond to the unexpected policy shock, which is the \epsilon^R_t in their equation (6). Is that right?

  2. The four and eight quarters ahead panels should correspond to the anticipated policy shock, which is the \sum^K_{k=1} \epsilon^R_{k,t-k} in their equation with K=4 or 8. However, I am not sure if they are the responses to the eps_z_news shock or the “pure” news shock in the professor Pfeifer’s code.

Many thanks for any suggestions, hints or helps.

Can provide a link to the paper version you are referencing. The published version at has a different figure numbering.

Dear Professor,

Thanks for your reply. It appears that the form does not allow me to post the link to the paper version I mentioned (I don’t know why). The figure I mentioned now appears Figure 2 in the published paper. Sorry for the confusion.

Yes, those are anticipated shocks. You can either use news shocks or perfect foresight simulations. In any case, the online appendix explains what they did.