IDEAS home Printed from https://ideas.repec.org/a/fip/fedlrv/00010.html
   My bibliography  Save this article

Announcements and the Role of Policy Guidance

Author

Listed:
  • Walsh, Carl E.

    (University of California, Santa Cruz)

Abstract

By providing guidance about future economic developments, central banks can affect private sector expectations and decisions. This can improve welfare by reducing private sector forecast errors, but it can also magnify the impact of noise in central bank forecasts. I employ a model of heterogeneous information to compare outcomes under opaque and transparent monetary policies. While better central bank information is always welfare improving, more central bank information may not be.

Suggested Citation

  • Walsh, Carl E., 2013. "Announcements and the Role of Policy Guidance," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 575-600.
  • Handle: RePEc:fip:fedlrv:00010
    as

    Download full text from publisher

    File URL: https://files.stlouisfed.org/files/htdocs/publications/review/13/11/walsh.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Geraats Petra M., 2005. "Transparency and Reputation: The Publication of Central Bank Forecasts," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-28, February.
    2. Ben S. Bernanke, 2007. "The recent financial turmoil and its economic and policy consequences," Speech 326, Board of Governors of the Federal Reserve System (U.S.).
    3. Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
    4. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
    5. Faust, Jon & Svensson, Lars E O, 2002. "The Equilibrium Degree of Transparency and Control in Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 520-539, May.
    6. repec:fip:fedgsq:y:2007:i:oct15 is not listed on IDEAS
    7. Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006. "How transparent are central banks?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 1-21, March.
    8. Alex Cukierman, 2009. "The Limits of Transparency," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 38(1-2), pages 1-37, February.
    9. Janet L. Yellen, 2005. "Policymaking on the FOMC: transparency and continuity," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep2.
    10. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    11. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    12. Christian Hellwig, 2002. "Public Announcements, Adjustment Delays, and the Business Cycle (November 2002)," UCLA Economics Online Papers 208, UCLA Department of Economics.
    13. Jeffery Amato & Hyun Song Shin, 2003. "Public and Private Information in Monetary Policy Models," Levine's Bibliography 666156000000000092, UCLA Department of Economics.
    14. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
    15. Walsh, Carl E, 1999. "Announcements, Inflation Targeting and Central Bank Incentives," Economica, London School of Economics and Political Science, vol. 66(262), pages 255-269, May.
    16. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March.
    17. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
    18. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
    19. Lars E. O. Svensson & Michael Woodford, 2003. "Optimal Policy with Partial Information in a Forward-Looking Model: Certainty-Equivalence Redux," NBER Working Papers 9430, National Bureau of Economic Research, Inc.
    20. Carl E. Walsh, 2007. "Transparency, Flexibility, and Inflation Targeting," Central Banking, Analysis, and Economic Policies Book Series,in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 7, pages 227-263 Central Bank of Chile.
    21. Carl E. Walsh, 2007. "Optimal Economic Transparency," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 5-36, March.
    22. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Salle, Isabelle & Yıldızoğlu, Murat & Sénégas, Marc-Alexandre, 2013. "Inflation targeting in a learning economy: An ABM perspective," Economic Modelling, Elsevier, vol. 34(C), pages 114-128.
    2. Salle, Isabelle L., 2015. "Modeling expectations in agent-based models — An application to central bank's communication and monetary policy," Economic Modelling, Elsevier, vol. 46(C), pages 130-141.
    3. Ummad Mazhar, 2013. "Does Greater Transparency Stabilize Output? Evidence from Panel Data," SBP Working Paper Series 59, State Bank of Pakistan, Research Department.
    4. Nikola Mirkov & Gisle James Natvik, 2016. "Announcements of Interest Rate Forecasts: Do Policymakers Stick to Them?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(5), pages 901-920, August.
    5. Paul Hubert, 2009. "An Empirical Review of Federal Reserve’s Informational Advantage," Documents de Travail de l'OFCE 2009-03, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Kobayashi, Teruyoshi, 2009. "Announcements and the effectiveness of monetary policy: A view from the US prime rate," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2253-2266, December.
    7. Turdaliev, Nurlan, 2009. "Transparency in monetary policy: A general equilibrium approach," Economic Modelling, Elsevier, vol. 26(3), pages 608-613, May.
    8. Paul Hubert, 2015. "Revisiting the Greenbook’s relative forecasting performance," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 151-179.

    More about this item

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:00010. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Oates). General contact details of provider: http://edirc.repec.org/data/frbslus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.