This paper analyses in a simple global games framework welfare effects of different communication strategies of a central bank: it can either publish no more than its overall assessment of the economy or be more transparent, giving detailed reasons for this assessment. The latter strategy is shown to be superior because it enables agents to use private information and to be less dependent on common knowledge. This result holds true even if the strategies of agents are strategic complements, for which case it has been argued that too much transparency might induce agents to neglect their private knowledge.
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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number
16-07.
Find related papers by JEL classification: D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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