Central bank's two-way communication with the public and inflation dynamics

Kosuke Aoki and Takeshi Kimura

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using a model of island economy where financial markets aggregate dispersed information of the public, we analyze how two-way communication between the central bank and the public affects inflation dynamics. When inflation target is observable and credible to the public, markets provide the bank with information about the aggregate state of the economy, and hence the bank can stabilize inflation. However, when inflation target is unobservable or less credible, the public updates their perceived inflation target and the information revealed from markets to the bank becomes less perfect. The degree of uncertainty facing the bank crucially depends on how two-way communication works.

JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2008-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eprints.lse.ac.uk/25483/ Open access version. (application/pdf)

Related works:
Working Paper: Central Bank's Two-Way Communication with the Public and Inflation Dynamics (2009)
Working Paper: Central bank's two-way communication with the public and inflation dynamics (2008)
Working Paper: Central Bank's Two-Way Communication with the Public and Inflation Dynamics (2008)
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:ehl:lserod:25483

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().