American Economic Review Vol. 79 No. 1 1989
Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements
Abstract
This paper examines the problem faced by the Federal Reserve in announcing its private information about its future policies. Because it would like to manipulate expectations and pursue a time-inconsistent policy, the Fed cannot reveal its policy objectives precisely and credibly. It can, however, communicate some information about its goals through the "cheap talk" mechanism of Crawford and Sobel: making announcements that are imprecise, and only give ranges within which these goals may lie.
- Volume
- 79
- Issue
- 1
- Pages
- 32-42
- Sources
- bibtex:phds-export.bib