Imperfect Central Bank Communication - Information versus Distraction

Author/Editor:

Athanasios Orphanides ; Spencer Dale ; Pär Österholm

Publication Date:

March 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Much of the information communicated by central banks is noisy or imperfect. This paper considers the potential benefits and limitations of central bank communications in a model of imperfect knowledge and learning. It is shown that the value of communicating imperfect information is ambiguous. There is a risk that the central bank can distract the public; this means that the central bank may prefer to focus its communication policies on the information it knows most about. Indeed, conveying more certain information may improve the public's understanding to the extent that it "crowds out" a role for communicating imperfect information.

Series:

Working Paper No. 2008/060

Subject:

English

Publication Date:

March 1, 2008

ISBN/ISSN:

9781451869224/1018-5941

Stock No:

WPIEA2008060

Pages:

31

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