Signalling in a Model of Monetary Policy with Incomplete Information
The expectations of the public about future macroeconomic policy d epend in part upon the preferences that they believe the policymaker to have. Fo r example, when the policymaker is "dry"-i.e., more concerned about low inflat ion than low unemployment-lower inflation might be expected than when he is "wet." Thus, there is an incentive for the policymaker to influence expectations a bout his preferences by means of his current policy decisions. This paper uses R. Barro and D. Gordon's natural rate model and draws on recent work in oligopoly to investigate the use of monetary policy as a signal of the policymaker's pref erence. Copyright 1986 by Royal Economic Society.
Volume (Year): 38 (1986)
Issue (Month): 3 (November)
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