Central banks communicate with “partial transparency” and “deliberate imprecision” to avoid the public overreacting or underreacting to their messaging, a new paper from the European Central Bank argues.
The working paper, published on November 4, develops a game-theoretic model which shows that when deciding how to communicate, central banks try to strike a balance between the confidence they have in their forecasts and their reputation for getting things right.
The authors, Laura Gáti and Amy
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