How much information should a central bank (CB) have about (i) policy objectives and (ii) operational shocks to the effect of monetary policy? We consider a version of the Barro–Gordon credibility problem in which monetary policy signals an inflation-biased CB's private information on both...

The effects of different institutional arrangements for the central bank are examined in the presence of economic shocks and uncertainty about the central banker's and the medianvoter's inflation target. A contract which is based on self-imposed monetary target announcements proves to be...