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Strategically reported inflation expectation: a cheap-talk approach

Author

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  • Marcelo de C. Griebeler

    (Federal University of Rio Grande do Sul)

Abstract

We study the strategic relationship between a central bank and a biased economic agent (forecaster) responsible for reporting the economy's inflation expectation to the former. Through a simple cheap-talk model, we show that the possibility of informative communication between the above players increases as: (i) the forecaster's bias decreases; (ii) the degree in which expectations affect current inflation increases; and (iii) the uncertainty about the true value of the inflation expectation - measured by its variance - increases. Our analysis is a first step towards a deeper comprehension of the strategic relationship between central banks and those responsible for reporting inflation expectation.

Suggested Citation

  • Marcelo de C. Griebeler, 2019. "Strategically reported inflation expectation: a cheap-talk approach," Economics Bulletin, AccessEcon, vol. 39(1), pages 264-269.
    • Handle: RePEc:ebl:ecbull:eb-18-00928
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    monetary policy; central bank; survey-based measures; game theory.;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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