Optimal Monetary Policy when Information is Market-Generated
Kenza Benhima () and
No 13817, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The nature of the private sector's information changes the optimal conduct of monetary policy. When firms observe their individual demand and use it as a signal of real shocks, the optimal policy consists in maximizing the information content of that signal. When real shocks are deflationary (like labor supply shocks), the optimal policy is countercyclical and magnifies price movements, which contrasts with the exogenous information case, where optimal monetary policy is procyclical and stabilizes prices. When the central bank communicates its information to the public, this policy is still optimal if firms pay limited attention to central bank announcements.
Keywords: central bank communication; endogenous information; Expectations; Information Frictions; Optimal monetary policy (search for similar items in EconPapers)
JEL-codes: D83 E32 E52 F32 (search for similar items in EconPapers)
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: Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
Working Paper: Optimal Monetary Policy when Information is Market-Generated (2017)
Working Paper: Optimal Monetary Policy when Information is Market-Generated (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13817
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13817
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().