IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v229y2023ics016517652300229x.html
   My bibliography  Save this article

Optimal policy with dispersed information and uncertain monetary transmission

Author

Listed:
  • Femminis, Gianluca
  • Piccirilli, Giulio

Abstract

In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting prices. To correct the ensuing inefficiency a state-contingent fiscal policy is required.

Suggested Citation

  • Femminis, Gianluca & Piccirilli, Giulio, 2023. "Optimal policy with dispersed information and uncertain monetary transmission," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s016517652300229x
    DOI: 10.1016/j.econlet.2023.111204
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016517652300229X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2023.111204?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Isabel Correia & Juan Pablo Nicolini & Pedro Teles, 2008. "Optimal Fiscal and Monetary Policy: Equivalence Results," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 141-170, February.
    2. George-Marios Angeletos & Alessandro Pavan, 2009. "Policy with Dispersed Information," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 11-60, March.
    3. Romain Baeriswyl & Camille Cornand & Bruno Ziliotto, 2020. "Observing and Shaping the Market: The Dilemma of Central Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 1973-2005, December.
    4. George-Marios Angeletos & Jennifer La’O, 2020. "Optimal Monetary Policy with Informational Frictions," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1027-1064.
    5. George-Marios Angeletos & Luigi Iovino & Jennifer La'O, 2016. "Real Rigidity, Nominal Rigidity, and the Social Value of Information," American Economic Review, American Economic Association, vol. 106(1), pages 200-227, January.
    6. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, July.
    7. Luis Gonzalo Llosa & Venky Venkateswaran, 2022. "Efficiency Under Endogenous Information Choice: A Price-Setting Application," Journal of the European Economic Association, European Economic Association, vol. 20(4), pages 1619-1646.
    8. Femminis, Gianluca & Piccirilli, Giulio, 2021. "Efficient information acquisition with heterogeneous agents," Economics Letters, Elsevier, vol. 207(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:hal:journl:hal-04808798 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Angeletos, George-Marios & Iovino, Luigi & La'O, Jennifer, 2020. "Learning over the business cycle: Policy implications," Journal of Economic Theory, Elsevier, vol. 190(C).
    2. George-Marios Angeletos, 2018. "Frictional Coordination," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 563-603.
    3. Iovino, Luigi & La’O, Jennifer & Mascarenhas, Rui, 2022. "Optimal monetary policy and disclosure with an informationally-constrained central banker," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 151-172.
    4. Pellet, Thomas & Tahbaz-Salehi, Alireza, 2023. "Rigid production networks," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 86-102.
    5. Camille Cornand & Rodolphe Dos Santos Ferreira, 2021. "Central bank’s stabilization and communication policies when firms have motivated overconfidence in their own information accuracy or processing," Working Papers 2118, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Christian Hellwig & Venky Venkateswaran, 2024. "Dispersed Information, Nominal Rigidities and Monetary Business Cycles: A Hayekian Perspective," NBER Working Papers 33215, National Bureau of Economic Research, Inc.
    7. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    8. Jia, Chengcheng, 2023. "The informational effect of monetary policy and the case for policy commitment," European Economic Review, Elsevier, vol. 156(C).
    9. Femminis, Gianluca & Piccirilli, Giulio, 2021. "Efficient information acquisition with heterogeneous agents," Economics Letters, Elsevier, vol. 207(C).
    10. Kohlhas, Alexandre N., 2020. "An informational rationale for action over disclosure," Journal of Economic Theory, Elsevier, vol. 187(C).
    11. Jonathan G James & Phillip Lawler, 2017. "Optimal Transparency and Policy Intervention with Heterogeneous Signals and Information Stickiness," Manchester School, University of Manchester, vol. 85(5), pages 577-600, September.
    12. Marco Bassetto & Carlo Galli, 2019. "Is Inflation Default? The Role of Information in Debt Crises," American Economic Review, American Economic Association, vol. 109(10), pages 3556-3584, October.
    13. Coenen, Günter & Ehrmann, Michael & Gaballo, Gaetano & Hoffmann, Peter & Nakov, Anton & Nardelli, Stefano & Persson, Eric & Strasser, Georg H., 2017. "Communication of monetary policy in unconventional times," CFS Working Paper Series 578, Center for Financial Studies (CFS).
    14. Drenik, Andrés & Perez, Diego J., 2020. "Price setting under uncertainty about inflation," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 23-38.
    15. Manuel Amador & Pierre-Olivier Weill, 2010. "Learning from Prices: Public Communication and Welfare," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 866-907.
    16. Bassetto, Marco, 2019. "Forward guidance: Communication, commitment, or both?," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 69-86.
    17. Joshua Bernstein & Rupal Kamdar, 2023. "Rationally Inattentive Monetary Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 265-296, April.
    18. Taneva, Ina A, 2015. "Information Design," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-50, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Thomas Lustenberger & Enzo Rossi, 2022. "The Social Value of Information: A Test of a Beauty and Nonbeauty Contest," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(7), pages 2125-2148, October.
    20. Ippei Fujiwara & Yuichiro Waki, 2015. "Private news and monetary policy forward guidance or (the expected virtue of ignorance)," Globalization Institute Working Papers 238, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    Monetary transmission; Fiscal policy; Parameter uncertainty;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s016517652300229x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.