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Price-Level Determination Under Dispersed Information and Monetary Policy

Kosuke Aoki

No 5570, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper considers the determination of aggregate price level under dispersed information. Central Bank sets policy in response to its noisy measure of the price level, and each agent makes its decisions by observing a subset of data. Information revealed to the agents and Bank is determined endogenously. It is shown that the aggregate state of the economy is not revealed perfectly to anybody but this economy behaves as if it is a representative-agent economy in which the representative agent has perfect information while the Bank has partial information. The Bank has information set affects fluctuations in the price level through its effect on policy.

Keywords: monetary policy; uncertainty (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
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Journal Article: PRICE‐LEVEL DETERMINATION UNDER DISPERSED INFORMATION AND MONETARY POLICY* (2006) Downloads
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