Monetary Policy in the Information Economy

Michael Woodford

No 8674, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper considers two challenges that improvements in private-sector information-processing capabilities may pose for the effectiveness of monetary policy. It first considers the consequences of improved information about central-bank actions, and argues that the management of expectations will become even more important to effective monetary policy. The paper next considers the consequences of the potential erosion of private-sector demand for central-bank money. This should not fundamentally impair the ability of central banks to achieve their stabilization objectives, though it may require a new approach to the implementation of monetary policy. The advantages of a 'channel' system, in which central-bank standing facilities are the main tool used to control overnight interest rates, are discussed.

JEL-codes: E58 (search for similar items in EconPapers)
Date: 2001-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (142)

Published as Michael Woodford, 2001. "Monetary policy in the information economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-370.

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