Central Bank Communication and Interest Rate Rules

Marco Hoeberichts ()

WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department

Abstract: The central bank's influence on private sector expectations is an important channel of monetary policy. Therefore, it is important for a central bank to pay attention to its communication. It should also be aware that the public might not be willing or able to process all the information that the central bank provides. In this paper, we explicitly take the public's information processing constraint into account when we design the interest rate rule. We find that if inflationary expectations are important relative to the output gap in determining current inflation, the central bank should be less activist when the public has a tighter information processing constraint.

Keywords: interest rate rules; information processing; expectation formation; central bank (search for similar items in EconPapers)
JEL-codes: D83 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2003
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Working Paper: Central bank communication and interest rate rules (2004)
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