Central Bank's two-way communication with the public and inflation dynamics
By: Kosuke Aoki and Takeshi Kimura.
Contributors: Kimura, Takeshi.; London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 899
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2008
Place of publication: London
Language: eng
Format: Electronic resource
Description: Using a model of island economy where financial markets aggregate dispersed information of the public, we analyze how two-way communication between the central bank and the public affects inflation dynamics. When inflation target is observable and credible to the public, markets provide the bank with information about the aggregate state of the economy, and hence the bank can stabilize inflation. However, when inflation target is unobservable or less credible, the public updates their perceived inflation target and the information revealed from markets to the bank becomes less perfect. The degree of uncertainty facing the bank crucially depends on how two-way communication works.
Notes: Title from PDF file (viewed on Jan. 23, 2009).

"November 2008."

Includes bibliographical references.

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