Imperfect Central Bank Communication - Information versus Distraction
33 Pages Posted: 24 Mar 2008
Date Written: March 2008
Abstract
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.
Keywords: Central banks, Transparency
Suggested Citation: Suggested Citation
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