Communication, Information and Inflation Expectations

We identify differences in the formation of inflationary expectations, credibility, and prediction errors, depending on the communication and in the level of information of price setters. Estimating dynamic panel data models we identify the relevance of being informed about the inflation target and, about the current inflation rate. We also find that the tone of the monetary policy communication reinforces the bias imposed on the monetary instrument. Through the interaction of information about inflation target and range, and the tone of monetary policy statements of the Central Bank, we conclude that partially informed agents form their expectations differently from non-informed ones, have lower prediction errors, and are more skeptical respect to the inflation target.