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Vagueness, credibility, and government policy

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  • Joseph G. Haubrich

Abstract

A discussion of the reasons why it may be in a government agency's--and society's--best interest to be vague about policy objectives. Using the concept of \"cheap talk,\" the author explains that when an agency faces a trade-off between precise and credible announcements, its best move may be to provide truthful but limited information.

Suggested Citation

  • Joseph G. Haubrich, 1995. "Vagueness, credibility, and government policy," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 13-19.
    • Handle: RePEc:fip:fedcer:y:1995:i:qi:p:13-19
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    File URL: http://www.clevelandfed.org/Research/Review/1995/95-q1-haubrich.pdf
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    References listed on IDEAS

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    1. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
    2. Matthews, Steven A. & Okuno-Fujiwara, Masahiro & Postlewaite, Andrew, 1991. "Refining cheap-talk equilibria," Journal of Economic Theory, Elsevier, vol. 55(2), pages 247-273, December.
    3. Kenneth Spong, 2000. "Banking regulation : its purposes, implementation, and effects," Monograph, Federal Reserve Bank of Kansas City, number 2000bria.
    4. Kane, Edward J., 1980. "Politics and Fed policymaking : The more things change the more they remain the same," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 199-211, April.
    5. Buser, Stephen A & Chen, Andrew H & Kane, Edward J, 1981. "Federal Deposit Insurance, Regulatory Policy, and Optimal Bank Capital," Journal of Finance, American Finance Association, vol. 36(1), pages 51-60, March.
    6. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    7. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
    8. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
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    2. Vicki Bier & Naraphorn Haphuriwat, 2011. "Analytical method to identify the number of containers to inspect at U.S. ports to deter terrorist attacks," Annals of Operations Research, Springer, vol. 187(1), pages 137-158, July.

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