Transparency and Credibility: Monetary Policy with Unobservable Goals

We define and study transparency, credibilitym and reputation in a model where the central bank's characteristics are unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more inflationary policy than a high-credibility bank, in the sense that it induces higher inflation, but a less expansionary policy in the sense that it induces lower inflation and employment than expected.

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Year of publication:	1998
Authors:	Faust, J. ; Svensson, L.E.O.
Institutions:	Institute for International Economic Studies (IIES), Stockholms Universitet
Subject:	MONETARY POLICY \| CENTRAL BANKS \| INFLATION

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Series:	Stockholm - International Economic Studies.
Type of publication:	Book / Working Paper
Notes:	40 pages
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005669798