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Central Bank Transparency and the Signal Value of Prices

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Author Info
Stephen Morris (Princeton University)
Hyun Song Shin (Princeton University)

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Abstract

The effectiveness of monetary policy hinges on the central bank's ability to influence market expectations. Central bank transparency is a means toward this end. However, the more effective the central bank is at influencing the market's expectations, the greater is the potential for market outcomes to reflect the central bank's own assessment of the economy. The role of market prices in aggregating the information held by dispersed individual economic agents may thereby be impaired. This paper explores trade-offs involved in central bank transparency and relates them to the debates concerning the overweighting of public information in market decisions and the welfare consequences of greater provision of public information.

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File URL: http://www.brookings.edu/press/Journals/2006/brookingspapersoneconomicactivity22005.aspx
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Publisher Info
Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 36 (2005)
Issue (Month): 2005-2 ()
Pages: 1-66
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Handle: RePEc:bin:bpeajo:v:36:y:2005:i:2005-2:p:1-66

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Related research
Keywords: macroeconomics; Central Bank Transparency; Signal Value; Prices;

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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This page was last updated on 2009-11-8.

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