Description

Much of the information communicated by central banks is noisy or imperfect. This paper considers the potential benefits and limitations of central bank communications in a model of imperfect knowledge and learning. It is shown that the value of communicating imperfect information is ambiguous. There is a risk that the central bank can distract the public; this means that the central bank may prefer to focus its communication policies on the information it knows most about. Indeed, conveying more certain information may improve the public's understanding to the extent that it "crowds out" a role for communicating imperfect information.

Taxonomy

Banks and banking , Central banks , Economic policy , Financial institutions and markets , Fiscal policy , Monetary policy , Transparency

More publications in this series: Working Papers

More publications by: Athanasios Orphanides ; Spencer Dale ; Pär Österholm