December 2018 issue contents
Information Design, Signaling, and Central Bank Transparency

by Wataru Tamura
Nagoya University


This study examines monetary policy and central bank communication when a monetary instrument signals the central bank's private information. A novel feature is that the central bank ex ante determines how much information it acquires and how much of this information it releases to the public. Using a static model with a neoclassical Phillips curve, I show that an optimal information policy is composed of the full disclosure of the bank's acquired information, eliminating the signaling effect of monetary policy. The optimal signal consists of two linear combinations of three shocks, balancing an informational tradeoff between inflation and output stabilization.

JEL Code: E58, E52, D82, D83.

Full article (PDF, 36 pages, 501 kb)