Policy uncertainty and optimal provision of public information

Effective monetary policy relies on managing expectations about both economic fundamentals and policy rules, yet the strategic trade-off between these two communication dimensions remains underexplored. This paper extends the Keynesian beauty contest framework by explicitly incorporating policy uncertainty and a dual communication channel, through which policymakers simultaneously disclose two forms of public information: economic fundamentals and policy rules. Our findings show that the optimal allocation of communication efforts across these disclosures is state-contingent. When unexpected economic shocks are large, communication efforts should focus exclusively on clarifying policy rules. Under small economic shocks, however, the optimal allocation depends on the public sector’s informational advantage and the private sector’s information structure. Greater effort should be devoted to communicating economic fundamentals when the public sector holds a pronounced informational advantage or when private agents already possess a strong understanding of policy rules.