Optimal monetary policy when information is market-generated

Benhima, Kenza (University of Lausanne, Switzerland) ; Blengini, Isabella (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland)

The nature of the private sector’s information changes the optimal conduct of monetary policy. When firms observe their individual demand and use it as a signal of real shocks, the optimal policy consists in maximising the information content of that signal. When real shocks are deflationary (like labour supply shocks), the optimal policy is countercyclical and magnifies price movements, which contrasts with the exogenous information case, where optimal monetary policy is procyclical and stabilises prices. When the central bank communicates its information to the public, this policy is still optimal if firms pay limited attention to central bank announcements.


Keywords:
Article Type:
scientifique
Faculty:
Economie et Services
School:
EHL
Institute:
Aucun institut
Subject(s):
Economie/gestion
Date:
2020-05
Pagination:
20 p.
Published in:
The economic journal
Numeration (vol. no.):
2020, vol. 130, no 628, pp. 956–975
DOI:
ISSN:
0013-0133
Appears in Collection:

Note: The file is under embargo until: 2022-01-24


 Record created 2020-09-25, last modified 2020-10-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)