Communication of Central Bank Thinking and Inflation Dynamics

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Price:  $18.00

Author/Editor: Man-Keung Tang, Xiangrong Yu
Release Date: © August, 2011
ISBN : 978-1-46390-219-3
Stock #: WPIEA2011209
English
Stock Status: On back-order

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Description

This paper studies the role of central bank communication of its economic assessment in shaping inflation dynamics. Imperfect information about the central bank's assessment - or the basis for monetary policy decisions - could complicate the private sector's learning about its policy response function. We show how clear central bank communication, which facilitates agents' understanding of policy reasoning, could bring about less volatile inflation and interest rate dynamics, and afford the authorities with greater policy flexibility. We then estimate a simple monetary model to fit the Mexican economy, and use the suggested paramters to illustrate the model's quantitative implications in scenarios where the timing, nature and persistence of shocks are uncertain.

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: Man-Keung Tang ; Xiangrong Yu