In 1994 the Federal Reserve System moved to a more transparent reporting of monetary policy. In this paper we first discuss the various sources of uncertainty that play an essential role in the formulation and conduct of monetary policy and evaluate the degree of uncertainty faced by monetary...

We describe the inflation targeting framework (ITF) and compare it against hypothetical best-practice based on optimization. The core requirements of the ITF are an explicit long-run inflation goal and a commitment to transparency in policymaking. Advocates and practitioners of the ITF have made...

Central bank communication is becoming a key aspect of monetary policy. How much financial markets listen and, possibly, understand Banco de Mexico's communication on its monetary policy stance should be a key consideration for the central bank to further modernize its monetary policy toolkit....

This paper provides original empirical evidence on the emerging practice by central banks of communicating uncertainty in their inflation projections. We compare the effects of point and density projections in a learning-to-forecast laboratory experiment where participants' aggregated...

Do the benefits of central bank transparency depend on the structure of financial markets? We address this question in a two-country model with dispersed information among price-setting firms. The volatility of the real exchange rate is non-monotonic in the precision of public communications....

The modern model of central bank communication suggests that central bankers prefer to err on the side of saying too much rather than too little. The reason is that most central bankers believe that clear and concise communication of monetary policy helps achieve their goals. For the Federal...

Should central banks increase their degree of transparency any further? We show that there is likely to be an optimal intermediate degree of central bank transparency. Up to this optimum more transparency is desirable: it improves the quality of private sector inflation forecasts. But beyond the...