Announcements and the Role of Policy Guidance
نویسنده
چکیده
By providing guidance about future economic developments, central banks can a¤ect private sector expectations and decisions. This can improve welfare by reducing the e¤ects of asymmetric information and by leading to smaller forecast errors. But it can also magnify the impact of noise in the central banks forecasts. I employ a model of heterogeneous information to compare outcomes under opaque and transparency policies. While better central bank information is always welfare improving, more central bank information may not be.
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