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Talking Over Time ‐ Dynamic Central Bank Communication

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  • LAURA GÁTI

Abstract

This paper studies the optimal dynamic communication strategy of central banks using a Bayesian persuasion game framework. In a dynamic environment, financial market participants and the general public have misaligned interests because the present and future have different relevance in their optimization problems, leading to a novel trade‐off for the monetary authority. Compared to the static benchmark, I show that the central bank (CB's) optimal dynamic communication policy should put a higher weight on talking about the present state than the future. In addition, the CB should strategically send more noisy signals than in the static benchmark.

Suggested Citation

  • Laura Gáti, 2023. "Talking Over Time ‐ Dynamic Central Bank Communication," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(5), pages 1147-1176, August.
    • Handle: RePEc:wly:jmoncb:v:55:y:2023:i:5:p:1147-1176
    DOI: 10.1111/jmcb.12934
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    References listed on IDEAS

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