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Communication and monetary policy

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Author Info

  • Jeffery D. Amato

    (Goldman Sachs International)

  • Hyun Song Shin

    (Princeton University - Department of Economics)

  • Stephen Morris

    (Princeton University - Department of Economics)

Abstract

Recent trends toward greater central bank independence and the adoption of formal inflation targeting by several countries have served to emphasise the importance of communication policy. In this paper, we explore some of the economic effects of public information that arise whenever public information serves the dual role of conveying fundamental information as well as serving as a focal point for better coordination. More precise public information is a double-edged tool. While it is very effective in influencing actions through coordination, sometimes it can be too effective, and coordinate actions away from fundamentals.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 123.

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Length: 30 pages
Date of creation: Jan 2003
Date of revision:
Handle: RePEc:bis:biswps:123

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Keywords: Communication and monetary policy;

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  1. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, vol. 58(2), pages 277-307, March.
  2. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  3. Woodford, M., 1999. "Optimal Monetary Policy Inertia.," Papers 666, Stockholm - International Economic Studies.
  4. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  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. Michael Woodford, 2001. "Imperfect Common Knowledge and the Effects of Monetary Policy," NBER Working Papers 8673, National Bureau of Economic Research, Inc.
  7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  8. Henrik Jensen, . "Optimal Degrees of Tranaparency in Monetary Policymaking," EPRU Working Paper Series 01-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  9. repec:imf:imfocp:202 is not listed on IDEAS
  10. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  11. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608.
  12. Carol Corrado, 1986. "Reducing uncertainty in current analysis and projections: the estimation of monthly GNP," Special Studies Papers 209, Board of Governors of the Federal Reserve System (U.S.).
  13. Howitt, Peter & McAfee, R Preston, 1992. "Animal Spirits," American Economic Review, American Economic Association, vol. 82(3), pages 493-507, June.
  14. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
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