Imperfect Central Bank Communication: Information versus Distraction
AbstractMuch of the information communicated by central banks is noisy or imperfect. This paper considers the potential benefits and limitations of central bank communications in a model of imperfect knowledge and learning. It is shown that the value of communicating imperfect information is ambiguous. If the public is able to assess accurately the quality of the imperfect information communicated by a central bank, such communication can inform and improve the public’s decisions and expectations. But if not, communicating imperfect communication has the potential to mislead and distract. The risk that imperfect communication may detract from the public’s understanding should be considered in the context of a central bank’s communications strategy. The risk of distraction means the central bank may prefer to focus its communication policies on the information it knows most about. Indeed, conveying more certain information may improve the public’s understanding to the extent that it "crowds out" a role for communicating imperfect information.
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Bibliographic InfoPaper provided by Central Bank of Cyprus in its series Working Papers with number 2008-1.
Length: 35 pages
Date of creation: Feb 2008
Date of revision:
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Web page: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=1
More information through EDIRC
Transparency; forecasts; learning;
Other versions of this item:
- Spencer Dale & Athanasios Orphanides & Pär Österholm, 2011. "Imperfect Central Bank Communication: Information versus Distraction," International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 3-39, June.
- Athanasios Orphanides & Spencer Dale & PÃ¤r Ã–sterholm, 2008. "Imperfect Central Bank Communication - Information versus Distraction," IMF Working Papers 08/60, International Monetary Fund.
- Dale, Spencer & Orphanides, Athanasios & Österholm, Pär, 2008. "Imperfect Central Bank Communication: Information versus Distraction," Working Paper Series 2008:3, Uppsala University, Department of Economics.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-CBA-2009-01-03 (Central Banking)
- NEP-MAC-2009-01-03 (Macroeconomics)
- NEP-MON-2009-01-03 (Monetary Economics)
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.:
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