Economics at your fingertips  

Monetary policy when the objectives of central bankers are imperfectly observable

Francesco Salsano

Scottish Journal of Political Economy, 2022, vol. 69, issue 4, 396-415

Abstract: The paper presents a theoretical model for analysis of the imperfect observability of central bank preferences by the private sector on the decisions taken by the monetary authority, and therefore, on the inflation rate. It examines, in particular, the connection which, in the presence of a time‐inconsistency problem, arises between the observability of the monetary institution's goals and its equilibrium strategies. The model yields innovative results from the technical and economic points of view. From the technical point of view, it is possible to identify the conditions on the model's parameters under which a pure separating equilibrium arises, and the conditions under that there instead exists a “hybrid” equilibrium in which some types of Central Bankers adopt separating strategies whilst others adopt pooling strategies. From an economic point of view, the paper shows a number of relations that arise, in equilibrium, between the degree of observability and transparency of the Central Banker's goals and the inflation rate set by the Central Banker.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0036-9292

Access Statistics for this article

Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

More articles in Scottish Journal of Political Economy from Scottish Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2022-10-15
Handle: RePEc:bla:scotjp:v:69:y:2022:i:4:p:396-415