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Communication in repeated monetary policy games

  • Turdaliev, Nurlan
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    A central bank and the public are engaged in an infinitely repeated monetary policy game with communication. For reasonable discount factors, there exists an equilibrium in which the central bank fully reveals its private information. The fully revealing equilibrium is superior to the uninformative equilibrium. The welfare gain of transparency increases with the slope of the Phillips curve, the natural rate of unemployment, and the degree of heterogeneity in the population. Transparency results in lower inflation but a higher variability of inflation.

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    File URL: http://www.sciencedirect.com/science/article/B6W4V-4W6Y85W-1/2/f19888c0108c08fad6d6bfe22441b9d3
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    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 19 (2010)
    Issue (Month): 2 (April)
    Pages: 228-243

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    Handle: RePEc:eee:reveco:v:19:y:2010:i:2:p:228-243
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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