Central bank's communication and stabilization policies under firms'motivated beliefs - emlyon business school
Article Dans Une Revue Economic Theory Année : 2024

Central bank's communication and stabilization policies under firms'motivated beliefs

Résumé

Using a simple microfounded macroeconomic model with price making firms and a central bank maximizing the welfare of a representative household, we show that the presence of firms'motivated beliefs has stark consequences for central banks' optimal communication and stabilization policies. Under pure communication, motivated beliefs overweighting the accuracy of firms'private information may reverse the bang-bang solution of transparency found in the literature under objective beliefs and lead to intermediate levels of communication. Similarly, when communication and stabilization policies are combined, motivated beliefs overweighting firms'ability to process idiosyncratic information in general may reverse the bang-bang solution of opacity applying under objective beliefs, leading again to intermediate levels of communication and stabilization.
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Dates et versions

hal-04808798 , version 1 (28-11-2024)

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Camille Cornand, Rodolphe Dos Santos Ferreira. Central bank's communication and stabilization policies under firms'motivated beliefs. Economic Theory, In press, ⟨10.1007/s00199-024-01598-1⟩. ⟨hal-04808798⟩
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