IDEAS home Printed from https://ideas.repec.org/p/bir/birmec/11-10.html
   My bibliography  Save this paper

Monetary Policy Games, Instability and Incomplete Information

Author

Listed:
  • Richard Barrett
  • Ioanna Kokores
  • Somnath Sen

Abstract

Central banks, in executing monetary policy, while pursuing traditional objectives, such as the control of inflation, may try also to promote financial stability. In this paper, we explore a simple monetary policy game played between the central bank and the financial sector. The central bank can be of two types, one traditional and the other concerned with controlling the financial markets; however, the financial sector is unsure which, due to incomplete information. The conclusion of the paper is that for small shocks to inflation there is a pooling equilibrium, whereas for larger shocks there is separation. In the latter case, central bank concern for the stability of the financial sector is outed. We conclude by relating our results to the recent worldwide financial crisis.

Suggested Citation

  • Richard Barrett & Ioanna Kokores & Somnath Sen, 2011. "Monetary Policy Games, Instability and Incomplete Information," Discussion Papers 11-10, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:11-10
    as

    Download full text from publisher

    File URL: https://repec.cal.bham.ac.uk/pdf/11-10.pdf
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Ioanna Kokores, 2015. "Lean-Against-the-Wind Monetary Policy: The Post-Crisis Shift in the Literature," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 66-99, july-Dece.

    More about this item

    Keywords

    Monetary policy; central bank; financial stability; strategic behaviour; incomplete information;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bir:birmec:11-10. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Oleksandr Talavera (email available below). General contact details of provider: https://edirc.repec.org/data/debhauk.html .

    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.