Monetary policy under imperfect information and consumer confidence

Jan-Niklas Brenneisen

No 2020-04, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: Although it is generally accepted that consumer confidence measures are informative signals about the state of the economy, theoretical macroeconomic models designed for the analysis of monetary policy typically do not provide a role for them. I develop a framework with asymmetric information in which the efficacy of monetary policy can be improved, when the imperfectly informed central banks include confidence measures in their information set. The beneficial welfare effects are quantitatively substantial in both a stylized New Keynesian model with optimal monetary policy and an estimated medium-scale DSGE model.

Keywords: Consumer confidence; Monetary policy; Asymmetric information; Imperfect Information; New Keynesian macroeconomics; DSGE models (search for similar items in EconPapers)
JEL-codes: D82 D83 D84 E52 E58 E71 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:202004

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