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Money talks

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Author Info

  • Hoerova, Marie
  • Monnet, Cyril
  • Temzelides, Ted

Abstract

We study credible information transmission by a benevolent short-lived central bank. When externalities create a wedge between private and social welfare, the central bank has an incentive to misreport its information. Information transmission through monetary policy creates a distortion, thus, lending credibility.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 116 (2012)
Issue (Month): 3 ()
Pages: 617-621

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Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:617-621

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Information; Interest rates; Monetary policy;

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References

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  1. Aleksander Berentsen & Cyril Monnet, 2007. "Monetary Policy in a Channel System," CESifo Working Paper Series 1929, CESifo Group Munich.
  2. Ricardo Lagos & Randall Wright, 2002. "A unified framework for monetary theory and policy analysis," Working Paper 0211, Federal Reserve Bank of Cleveland.
  3. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  4. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," American Economic Review, American Economic Association, vol. 94(2), pages 91-98, May.
  5. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  6. Blinder, Alan S. & Ehrmann, Michael & de Haan, Jakob & Fratzscher, Marcel & Jansen, David-Jan, 2008. "Central Bank communication and monetary policy: a survey of theory and evidence," Working Paper Series 0898, European Central Bank.
  7. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2006. "Signaling in a Global Game: Coordination and Policy Traps," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 452-484, June.
  8. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  9. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June.
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Cited by:
  1. Eser, Fabian & Schwaab, Bernd, 2013. "Assessing asset purchases within the ECB’s securities markets programme," Working Paper Series 1587, European Central Bank.
  2. Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
  3. Panzera, Fabio S., 2011. "Price stability and financial imbalances: rethinking the macrofinancial framework after the 2007-8 financial crisis," FSES Working Papers 423, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
  4. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
  5. Paul Bloxham & Christopher Kent & Michael Robson, 2010. "Asset Prices, Credit Growth, Monetary and Other Policies: An Australian Case Study," RBA Research Discussion Papers rdp2010-06, Reserve Bank of Australia.
  6. Julian A. Parra-Polania, 2012. "Transparency: can central banks commit to truthful communication?," BORRADORES DE ECONOMIA 009614, BANCO DE LA REPÚBLICA.

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