Central Bank's Action and Communication
Romain Baeriswyl
Discussion Papers in Economics from University of Munich, Department of Economics
Abstract:
This paper contributes to the ongoing debate about the welfare effect of public information. In an environment characterized by imperfect common knowledge and strategic complementarities, Morris and Shin (2002)argue that noisy public information may be detrimental to welfare because public information is attributed too large a weight relative to its face value since it serves as a focal point. While this argument has received a great deal of attention in central banks and in the financial press, it considers communication as the sole task of a central bank and ignores that communication usually goes with a policy action. This paper accounts for the action task of a central bank and analyzes whether public disclosure is beneficial in the conduct of monetary policy when the central bank primarily tries to stabilize the economy with an instrument that is optimal with respect to its perhaps mistaken view. In this context, it turns out that transparency is particularly beneficial when central bank’s information is poorly accurate because it helps reducing the distortion associated with badly suited policies.
Keywords: differential information; monetary policy; transparency (search for similar items in EconPapers)
JEL-codes: D82 E52 E58 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://epub.ub.uni-muenchen.de/1381/1/Baeriswyl_CBAC.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:1381
Access Statistics for this paper
More papers in Discussion Papers in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().