News Management in Monetary Policy: When Central Banks Should Talk to the Government
AbstractCentral banks are often considered to be better informed about the present or future state of the economy than the government. A conservative central bank has an incentive to exploit this asymmetry by strategically managing its information policy. Strategic news management will keep the government uncertain about the state of the economy and increase the central bank's leeway for conducting a conservative monetary policy. We show that withholding information from the government is an equilibrium. However, there are also well-defined limits to strategic information policy as the central bank has to distort monetary policy to be in line with its news management. A simple extension of our findings is that, if the government on occasion learns about the bank's true information, it will then overrule the central bank's decision on monetary policy. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2000.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 1 (2000)
Issue (Month): 4 (November)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1465-6485
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Waller, Christopher J & Walsh, Carl E, 1996. "Central-Bank Independence, Economic Behavior, and Optimal Term Lengths," American Economic Review, American Economic Association, vol. 86(5), pages 1139-53, December.
- Eijffinger, Sylvester C W & Hoeberichts, Marco & Schaling, Eric, 2000.
"A Theory of Central Bank Accountability,"
CEPR Discussion Papers
2354, C.E.P.R. Discussion Papers.
- Svensson, Lars E.O., 1998.
"Inflation Targeting as a Monetary Policy Rule,"
646, Stockholm University, Institute for International Economic Studies.
- Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
- Svensson, L.E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Papers 646, Stockholm - International Economic Studies.
- Svensson, Lars E O, 1998. "Inflation Targeting as a Monetary Policy Rule," CEPR Discussion Papers 1998, C.E.P.R. Discussion Papers.
- Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
- Michelle R. Garfinkel & Seonghwan Oh, 1990.
"When and How Much to Talk: Credibility and Flexibility in Monetary Policy With Private Information,"
UCLA Economics Working Papers
593, UCLA Department of Economics.
- Garfinkel, Michelle R. & Oh, Seonghwan, 1995. "When and how much to talk credibility and flexibility in monetary policy with private information," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 341-357, April.
- Michelle R. Garfinkel & Seonghwan Oh, 1990. "When and how much to talk: credibility and flexibility in monetary policy with private information," Working Papers 1990-004, Federal Reserve Bank of St. Louis.
- Barro, Robert J. & Gordon, David B., 1983.
"Rules, discretion and reputation in a model of monetary policy,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 101-121.
- Robert J. Barro & David B. Gordon, 1984. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
- Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
- Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
- Christina D. Romer & David H. Romer, 1996. "Federal Reserve Private Information and the Behavior of Interest Rates," NBER Working Papers 5692, National Bureau of Economic Research, Inc.
- H.S. Shin, 1994. "News Management and the Value of Firms," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 58-71, Spring.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1998. "Does the Federal Reserve have an informational advantage? you can bank on it," Working Papers 98-2, Federal Reserve Bank of Boston.
- Berger, Helge & Woitek, Ulrich, 1997. "How opportunistic are partisan German central bankers: Evidence on the Vaubel hypothesis," European Journal of Political Economy, Elsevier, vol. 13(4), pages 807-821, December.
- Moser, Peter, 1999. "Checks and balances, and the supply of central bank independence," European Economic Review, Elsevier, vol. 43(8), pages 1569-1593, August.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Canzoneri, Matthew B, 1985.
"Monetary Policy Games and the Role of Private Information,"
American Economic Review,
American Economic Association, vol. 75(5), pages 1056-70, December.
- Matthew B. Canzoneri, 1983. "Monetary policy games and the role of private information," International Finance Discussion Papers 249, Board of Governors of the Federal Reserve System (U.S.).
- Christina D. Romer & David H. Romer, 1997.
"Institutions for Monetary Stability,"
in: Reducing Inflation: Motivation and Strategy, pages 307-334
National Bureau of Economic Research, Inc.
- Goodfriend, Marvin, 1986.
"Monetary mystique: Secrecy and central banking,"
Journal of Monetary Economics,
Elsevier, vol. 17(1), pages 63-92, January.
- Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
- Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
- Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
- Lohmann, Susanne, 1997. "Partisan control of the money supply and decentralized appointment powers," European Journal of Political Economy, Elsevier, vol. 13(2), pages 225-246, May.
- Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
- Eijffinger, S.C.W. & Hoeberichts, M.M. & Schaling, E., 1998.
"A Theory of Central Bank Accountability,"
1998-103, Tilburg University, Center for Economic Research.
- Gersbach, Hans & Hahn, Volker, 2006.
"Signaling And Commitment: Monetary Versus Inflation Targeting,"
Cambridge University Press, vol. 10(05), pages 595-624, November.
- Gersbach, Hans & Hahn, Volker, 2003. "Signalling and Commitment: Monetary versus Inflation Targeting," CEPR Discussion Papers 4151, C.E.P.R. Discussion Papers.
- Pierre L. Siklos & Martin T. Bohl, 2005.
"The Bundesbank's Communications Strategy and Policy Conflicts with the Federal Government,"
Southern Economic Journal,
Southern Economic Association, vol. 72(2), pages 395â409, October.
- Siklos, Pierre L. & Bohl, Martin T., 2005. "The Bundesbank's Communications Strategy and Policy Conflicts with the Federal Government," Working Paper Series 2005,8, European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.