Information Design, Signaling, and Central Bank Transparency

33 Pages Posted: 19 Jan 2018

See all articles by Wataru Tamura

Wataru Tamura

Nagoya University - Graduate School of Economics

Date Written: January 12, 2018

Abstract

This study examines monetary policy and central bank communication when a monetary instrument signals the central bank's private information. A novel feature is that the central bank ex ante determines how much information it acquires and how much of this information it releases to the public. Using a static model with a neoclassical Phillips curve, I show that an optimal information policy is composed of the full disclosure of the bank's acquired information, eliminating the signaling effect of monetary policy. The optimal signal consists of two linear combinations of three shocks, balancing an informational trade-off between inflation and output stabilization.

Keywords: monetary policy, transparency, signaling, information acquisition, Bayesian persuasion

JEL Classification: E58, E52, D82, D83

Suggested Citation

Tamura, Wataru, Information Design, Signaling, and Central Bank Transparency (January 12, 2018). Available at SSRN: https://ssrn.com/abstract=3100843 or http://dx.doi.org/10.2139/ssrn.3100843

Wataru Tamura (Contact Author)

Nagoya University - Graduate School of Economics ( email )

1 Furo-cho
Chikusa-ku
Nagoya, 464-8601
Japan

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