State-Dependent Central Bank Communication with Heterogeneous Beliefs

42 Pages Posted: 16 Sep 2021

Date Written: September 13, 2021


This paper studies the optimal disclosure strategy of a Sender who wants to influence hetero-geneous Receivers' expectations by providing public information. I introduce heterogeneous priors in an otherwise standard Bayesian persuasion model a la Gentzkow and Kamenica (2011) and characterize the dependence of optimal disclosure on the heterogeneity of beliefs. I show that heterogeneity matters in two ways: (i) it is optimal to send moderating signals, which implies sending signals with positive error probabilities in both states, and constitutes a non-trivial departure from the homogeneous beliefs case; (ii) higher dispersion in beliefs leads the information authority to send signals with lower error probabilities. I apply my framework to a central bank communication problem in which the policy maker communicates about aggregate conditions to influence rms' investment decisions. I empirically validate the model's predictions by showing that the FOMC unemployment rate forecasts are systematically biased in opposite directions in recessions and expansions. Also in line with the model's predictions, the forecast biases are decreasing in the degree of private sector disagreement for each state.

JEL Classification: E52, E58, D83

Suggested Citation

Herbert, Sylverie, State-Dependent Central Bank Communication with Heterogeneous Beliefs (September 13, 2021). Available at SSRN: or

Sylverie Herbert (Contact Author)

Banque de France ( email )

31 rue Croix des Petits Champs
Paris, NY 75001

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