Monetary policy is most effective when public beliefs about future policies are actively managed. This is the appeal of policy rules and commitment strategies, typically absent under discretion. But when a policymaker has some private information - as is the case in reality - belief management...

Monetary policy is most effective when public beliefs about future policies are actively managed. This is the appeal of policy rules and commitment strategies, typically absent under discretion. But when a policymaker has some private information - as is the case in reality - belief management...

We study optimal nominal demand policy in an economy with monopolistic competition and flexible prices when firms have imperfect common knowledge about the shocks hitting the economy. Parametrizing firms' information imperfections by a (Shannon) capacity parameter that constrains the amount of...

This paper examines the impact of public information in an economy where agents also have diverse private information. Since disclosures by central banks are an important source of public information, we are able to assess how the words of central bankers shape expectations, in addition to their...

Using theoretical and empirical analyses, this paper shows that the expectation dynamics induced by information asymmetry between the Central Bank (CB) and the public can cause the price puzzle. The signalling and learning dynamics between the CB and a representative private-sector agent under...

This paper considers the optimal degree of monetary-discretion when the central bank conducts policy based on its private information about the state of the economy and is unable to commit. Society seeks to maximize social welfare by imposing restrictions on the central bank's actions over time,...

For an economy characterized by neo-Keynesian wage rigidity, an optimal open market rule is derived based on financial market information, including auction price behavior. Simulations of a small model of the United States--estimated via full information maximum likelihood together with a...

Last global financial crisis, as well as any crisis, testifies imperfections of former model of development of economy and financial sector in particular. It forces to look in a new way and reconsider principles of functioning of the financial system. In article imperfections of the financial...

A parsimonious model of shifting policy regimes can simultaneously capture expected and actual US inflation during 1969-2005. Our model features a forward-looking New Keynesian Phillips curve and purposeful policymakers that can or cannot commit. Private sector learning about policymaker type...

This paper highlights the implications for EU macroeconomic policy at a relatively disaggregated level when key economic relationships are nonlinear or asymmetric. Using data for the EU and OECD countries we show that there are considerable non-linearities and asymmetries in the Phillips and...