Discussion paper

DP6761 Monetary Policy Inclinations

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.

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Citation

Gersbach, H and V Hahn (2008), ‘DP6761 Monetary Policy Inclinations‘, CEPR Discussion Paper No. 6761. CEPR Press, Paris & London. https://cepr.org/publications/dp6761