Information Acquisition by Price-Setters and Monetary Policy

Volker Hahn

No 07/73, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In this paper we examine a model where firms decide on the intensity of information acquisition about shocks. We analyze how the monetary policy framework impacts on the aggregate amount of information collected by firms. We show that it is socially beneficial to delegate monetary policy to a conservative central bank even if there are no incentives to push output above its long-run level. Transparency of central banks about economic shocks has ambiguous e ects on welfare. If an extreme level of opacity is feasible, it represents the social optimum. Otherwise full transparency may be a second-best solution.

Keywords: conservative central banker; optimal monetary policy; information; acquisition; Phillips curve; transparency (search for similar items in EconPapers)
JEL-codes: E12 E13 E58 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2007-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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