Adverse Effects of Monetary Policy Signalling

Jan Filáček and Jakub Matějů

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: Assuming information asymmetry between private agents and the central bank about the state of the economy, an unexpected change in interest rates signals the central bank's perceived state of the economy and facilitates an update of private expectations in an adverse, perhaps unintended way. This "updating channel" might counteract the standard transmission from interest rates to inflation and output. We develop a simple model laying down a theoretical basis for the adverse effects of monetary policy signalling. We also detect the presence of the updating channel in private forecasts of inflation in a cross-country sample of selected OECD countries.

Keywords: Asymmetric information; monetary policy; monetary transmission; signalling; updating channel (search for similar items in EconPapers)
JEL-codes: E17 E43 E58 (search for similar items in EconPapers)
Date: 2014-12
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:

Downloads: (external link)
https://www.cnb.cz/export/sites/cnb/en/economic-re ... wp/cnbwp_2014_13.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:cnb:wpaper:2014/13

Access Statistics for this paper

More papers in Working Papers from Czech National Bank, Research and Statistics Department Contact information at EDIRC.
Bibliographic data for series maintained by Tomas Karhanek ().