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Strategically reported inflation expectation: a cheap-talk approach

Marcelo Griebeler ()
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Marcelo Griebeler: Federal University of Rio Grande do Sul

Economics Bulletin, 2019, vol. 39, issue 1, 264-269

Abstract: We study the strategic relationship between a central bank and a biased economic agent (forecaster) responsible for reporting the economy's inflation expectation to the former. Through a simple cheap-talk model, we show that the possibility of informative communication between the above players increases as: (i) the forecaster's bias decreases; (ii) the degree in which expectations affect current inflation increases; and (iii) the uncertainty about the true value of the inflation expectation - measured by its variance - increases. Our analysis is a first step towards a deeper comprehension of the strategic relationship between central banks and those responsible for reporting inflation expectation.

Keywords: monetary policy; central bank; survey-based measures; game theory. (search for similar items in EconPapers)
JEL-codes: E5 C7 (search for similar items in EconPapers)
Date: 2019-02-18
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