We propose a signaling model in which the central bank and firms receive information on cost-push shocks independently from each other. If the firms’ signals are rather unlikely to be informative, central banks should remain silent about their own private signals. If, however, firms are...

In this paper we examine a model where firms decide on the intensity of information acquisition about shocks. We analyze how the monetary policy framework impacts on the aggregate amount of information collected by firms. We show that it is socially beneficial to delegate monetary policy to a...

We examine "Forward Guidance Contracts", which make central bankers' utility contingent on the precision of interest-rate forecasts for some time. Such Forward Guidance Contracts are a exible commitment device and can improve economic performance when the economy is stuck in a liquidity trap....

We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation expectations more...