Title of article
The signalingroleofpolicyactions
Author/Authors
Romain Baeriswyl، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2010
Pages
14
From page
682
To page
695
Abstract
In aneconomyaffectedbyshocksthatareimperfectlyknown,themonetaryinstrument
takesonadualstabilizingrole:asapolicyresponsethatdirectlyinfluencesthe
economyandasavehicleforinformationthatrevealsthecentralbank’sassessmentto
firms.Becausemark-upshockscannotbeneutralizedbymonetarypolicy,providing
firmswithmoreinformationabouttheseshocksexacerbatestheirreactionandcreates
a largerdistortion.Recognizingthesignalingroleofitsinstrument,thecentralbank
distortsitspolicyresponseinordertooptimallyshapefirms’beliefs.Whileproviding
firmswithmoreinformationisalwaysdetrimentaltotheoutputgap,ithasamore
subtleeffectonpricedispersiondependingonwhetherinformationisprovidedthrough
thetransparencychannelorthroughthesignalingchannel.Althoughmoretranspar-
ency isalwaysdetrimentaltowelfare,theinformationthatisconveyedbythemonetary
instrumentimproveswelfarewhenfirms’coordinationishighlyvaluable
Journal title
Journal of Monetary Economics
Serial Year
2010
Journal title
Journal of Monetary Economics
Record number
846422
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