Central Bank Communication and Interest Rate Rules
AbstractThe central bank's influence on private sector expectations is an important channel of monetary policy. Therefore, it is important for a central bank to pay attention to its communication. It should also be aware that the public might not be willing or able to process all the information that the central bank provides. In this paper, we explicitly take the public's information processing constraint into account when we design the interest rate rule. We find that if inflationary expectations are important relative to the output gap in determining current inflation, the central bank should be less activist when the public has a tighter information processing constraint.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 729.
Date of creation: 2003
Date of revision:
interest rate rules; information processing; expectation formation; central bank;
Other versions of this item:
- Marco Hoeberichts, 2004. "Central bank communication and interest rate rules," Money Macro and Finance (MMF) Research Group Conference 2003 44, Money Macro and Finance Research Group.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and 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
This paper has been announced in the following NEP Reports:
- NEP-MON-2003-07-13 (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.:
- Stephen Morris & Jeffery D. Amato & Hyun Song Shin, 2004.
"Communication and Monetary Policy,"
Yale School of Management Working Papers
ysm345, Yale School of Management.
- Jeffrey D. Amado & Stephen Morris & Hyun Song Shin, 2003. "Communication and Monetary Policy," Cowles Foundation Discussion Papers 1405, Cowles Foundation for Research in Economics, Yale University.
- Jeffery D. Amato & Hyun Song Shin & Stephen Morris, 2003. "Communication and monetary policy," BIS Working Papers 123, Bank for International Settlements.
- Jeffery Amato & Stephen Morris & Hyun Song Shin, 2003. "Communication and Monetary Policy," Levine's Working Paper Archive 506439000000000330, David K. Levine.
- 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.
- Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, December.
- Robert G. King, 2000. "The new IS-LM model : language, logic, and limits," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 45-103.
- Michael Woodford, 2001. "Imperfect Common Knowledge and the Effects of Monetary Policy," NBER Working Papers 8673, National Bureau of Economic Research, Inc.
- Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
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