Imprecision of Central Bank Announcements and Credibility

Daniel Laskar ()

PSE Working Papers from HAL

Abstract: We consider a model where the central bank faces a credibility problem in its announcements, but also cares about its credibility and, therefore, wants to make truthful announcements. We show that, although the central bank would be able to perfectly transmit its information to the private sector through precise announcements, the central bank may nonetheless prefer to make imprecise announcements. This choice of the central bank would be suboptimal from the point of view of society. However, if the central bank gives enough weight to making truthful announcements, this suboptimality disappears, because the central bank would then prefer precise announcements to imprecise announcements.

Keywords: central bank transparency; central bank announcements; imprecise announcements; credibility; transparence de la banque centrale; annonces de la banque centrale; annonces imprécises; crédibilité (search for similar items in EconPapers)
Date: 2010-11-29
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