DP6761 Monetary Policy Inclinations
|Author(s):||Hans Gersbach, Volker Hahn|
|Publication Date:||March 2008|
|Keyword(s):||central banks, commitment, ECB, Federal Reserve, policy inclinations, transparency|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=6761|
We examine whether the publication of forecasts concerning the likely future conduct of monetary policy is socially desirable. Introducing a new central bank loss function that accounts for the deviations from announcements, we incorporate forecasts about future inflation and interest rates into a dynamic monetary model. We show that the announcement of future interest rates is always socially detrimental. However, medium-term inflation projections tend to increase welfare.