2007-03-01
Central Bank forecasts and disclosure policy: Why it pays to be optimistic
Publication
Publication
European Journal of Political Economy , Volume 23 - Issue 1 p. 30- 50
In a model with forward-looking behavior, we study disclosure policy when a central bank has private information on the future state of the economy. We find that the effects of advance disclosure depend on the presence of uncertainty about policy targets when the shock occurs. With uncertainty about policy targets, disclosure is harmless to current outcomes, owing to the strong dependence of inflation expectations on policy actions, which induces the central bank to focus exclusively on price stability. If the central bank's targets are common knowledge, disclosure of future shocks impairs stabilization of current inflation and output.
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| doi.org/10.1016/j.ejpoleco.2006.09.008, hdl.handle.net/1765/73235 | |
| European Journal of Political Economy | |
| Organisation | Rotterdam School of Management (RSM), Erasmus University |
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Eijffinger, S., & Tesfaselassie, M. (2007). Central Bank forecasts and disclosure policy: Why it pays to be optimistic. European Journal of Political Economy, 23(1), 30–50. doi:10.1016/j.ejpoleco.2006.09.008 |
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