IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v41y2008i1p46-79.html
   My bibliography  Save this article

Information acquisition, dissemination, and transparency of monetary policy

Author

Listed:
  • Jacob Wong

Abstract

. This paper examines the role of transparency in a benevolent monetary authority's policies. Each firm's payoff depends on unobservable macroeconomic conditions and firms may incur a cost to acquire private information about macroeconomic conditions. The policy authority attempts to infer the underlying macroeconomic conditions from a noisy measure of aggregate actions and makes a public announcement to inform firms of this inference. High‐quality announcements provide firms the incentive not to gather private information and base actions solely on information contained in policy announcements. However, this makes the observed actions of firms less informative to the policy authority. Ce mémoire examine le rle de la transparence dans les politiques d'une autorité monétaire bienveillante. Les résultats financiers de chaque entreprise dépendent de conditions macroéconomiques qui ne sont pas observables et les entreprises peuvent avoir à encourir des cots pour acquérir ces renseignements. L'autorité monétaire essaie d'extraire ce que sont les conditions macroéconomiques de base à partir d'une mesure agrégée des activités, et en fait l'annonce pour informer les entreprises. La grande qualité de telles annonces incite les entreprises à ne pas essayer de se procurer de tels renseignements privément, ce qui fait qu'elles fondent leurs décisions seulement sur les renseignements annoncés par l'autorité monétaire. Voilà qui rend l'observation du comportement des entreprises bien moins riche en information pour l'autorité monétaire.

Suggested Citation

  • Jacob Wong, 2008. "Information acquisition, dissemination, and transparency of monetary policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(1), pages 46-79, February.
    • Handle: RePEc:wly:canjec:v:41:y:2008:i:1:p:46-79
    DOI: 10.1111/j.1365-2966.2008.00455.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1365-2966.2008.00455.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1365-2966.2008.00455.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeffery D. Amato & Stephen Morris & Hyun Song Shin, 2002. "Communication and Monetary Policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 18(4), pages 495-503.
    2. 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.
    3. Gadi Barlevy & Pietro Veronesi, 2000. "Information Acquisition in Financial Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(1), pages 79-90.
    4. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    5. 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.
    6. Ben S. Bernanke & Michael Woodford, 1997. "Inflation forecasts and monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 653-686.
    7. 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.
    8. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March.
    9. Svensson, Lars E. O. & Woodford, Michael, 2004. "Indicator variables for optimal policy under asymmetric information," Journal of Economic Dynamics and Control, Elsevier, vol. 28(4), pages 661-690, January.
    10. Svensson, Lars E. O. & Woodford, Michael, 2003. "Indicator variables for optimal policy," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 691-720, April.
    11. 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.
    12. Aoki, Kosuke, 2003. "On the optimal monetary policy response to noisy indicators," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 501-523, April.
    13. 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.
    14. Vives, Xavier, 1997. "Learning from Others: A Welfare Analysis," Games and Economic Behavior, Elsevier, vol. 20(2), pages 177-200, August.
    15. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
    16. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    17. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    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. Ui, Takashi, 2014. "The social value of public information with convex costs of information acquisition," Economics Letters, Elsevier, vol. 125(2), pages 249-252.
    2. James, Jonathan G. & Lawler, Phillip, 2012. "Heterogeneous information quality; strategic complementarities and optimal policy design," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 342-352.
    3. Sweder van Wijnbergen & Tim Willems, 2013. "Imperfect information, lagged labour adjustment, and the Great Moderation," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 219-239, April.
    4. Ryan Chahrour, 2014. "Public Communication and Information Acquisition," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 73-101, July.
    5. Takashi Ui, 2022. "Impacts of Public Information on Flexible Information Acquisition," Papers 2204.09250, arXiv.org, revised Apr 2022.
    6. Gianluca Femminis & Giulio Piccirilli, 2020. "Public information, education and welfare," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(1), pages 137-166, April.
    7. Takashi Ui, 2022. "Optimal and Robust Disclosure of Public Information," Papers 2203.16809, arXiv.org, revised Apr 2022.
    8. Amihai Glazer, 2008. "Crowding Out Wasteful Activities by Wasteful Activities," Working Papers 080908, University of California-Irvine, Department of Economics.
    9. Takashi Ui, 2022. "Optimal and Robust Disclosure of Public Information," Working Papers on Central Bank Communication 039, University of Tokyo, Graduate School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paul Hubert, 2010. "Monetary policy, imperfect information and the expectations channel [Politique monétaire,information imparfaite et canal des anticipations]," SciencePo Working papers Main tel-04095385, HAL.
    2. repec:spo:wpecon:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
    3. Elmar Mertens, 2016. "Managing Beliefs about Monetary Policy under Discretion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 661-698, June.
    4. repec:hal:wpspec:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
    5. repec:hal:spmain:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
    6. repec:spo:wpmain:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
    7. Romain Baeriswyl & Camille Cornand & Bruno Ziliotto, 2020. "Observing and Shaping the Market: The Dilemma of Central Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 1973-2005, December.
    8. van der Cruijsen, C.A.B. & Eijffinger, S.C.W., 2007. "The Economic Impact of Central Bank Transparency : A Survey," Discussion Paper 2007-06, Tilburg University, Center for Economic Research.
    9. van der Cruijsen, C.A.B., 2008. "The economic impact of central bank transparency," Other publications TiSEM 86c1ba91-1952-45b4-adac-8, Tilburg University, School of Economics and Management.
    10. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    11. Meixing Dai & Moïse Sidiropoulos, 2017. "How multiplicative uncertainty affects the tradeoff between information disclosure and stabilisation policy?," Working Papers of BETA 2017-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    12. repec:spo:wpmain:info:hdl:2441/5221 is not listed on IDEAS
    13. Facundo Albornoz & Joan-Maria Esteban & Paolo Vanin, 2009. "Government Information Transparency," Working Papers 392, Barcelona School of Economics.
    14. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    15. Carl Walsh, 2007. "Inflation Targeting and the Role of Real Objectives," Research and Policy Notes 2007/02, Czech National Bank.
    16. Paul Hubert, 2015. "Do Central Bank Forecasts Influence Private Agents? Forecasting Performance versus Signals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(4), pages 771-789, June.
    17. Carl E. Walsh, 2013. "Announcements and the Role of Policy Guidance," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 575-600.
    18. Turdaliev, Nurlan, 2010. "Communication in repeated monetary policy games," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 228-243, April.
    19. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
    20. Petra M. Geraats, 2006. "Transparency of Monetary Policy: Theory and Practice," CESifo Economic Studies, CESifo Group, vol. 52(1), pages 111-152, March.
    21. Demertzis, Maria & Hughes Hallett, Andrew, 2008. "Asymmetric information and rational expectations: When is it right to be "wrong"?," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1407-1419, December.
    22. Rosa, Carlo & Verga, Giovanni, 2007. "On the consistency and effectiveness of central bank communication: Evidence from the ECB," European Journal of Political Economy, Elsevier, vol. 23(1), pages 146-175, March.
    23. Lavan Mahadeva, 2007. "A model of market surprises," Bank of England working papers 327, Bank of England.
    24. Jakob de Haan & David-Jan Jansen, 2009. "The communication policy of the European Central Bank: An overview of the first decade," DNB Working Papers 212, Netherlands Central Bank, Research Department.
    25. Ippei Fujiwara & Yuichiro Waki, 2022. "The Delphic forward guidance puzzle in New Keynesian models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 280-301, October.
    26. David P. Myatt & Chris Wallace, 2008. "On the Sources and Value of Information: Public Announcements and Macroeconomic Performance," Economics Series Working Papers 411, University of Oxford, Department of Economics.

    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:wly:canjec:v:41:y:2008:i:1:p:46-79. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.