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Transparency in monetary policy: A general equilibrium approach

Authors
Journal
Economic Modelling
0264-9993
Publisher
Elsevier
Publication Date
Volume
26
Issue
3
Identifiers
DOI: 10.1016/j.econmod.2009.01.001
Keywords
  • Monetary Policy
  • Transparency
  • Central Bank
  • General Equilibrium
Disciplines
  • Economics

Abstract

Abstract We study a general equilibrium model with a central bank (CB) and two groups of agents, producers and workers. The CB maximizes a weighted average of utilities of the two groups. The CB has two possible types, one favoring workers and the other favoring producers. The CB's type is private information. We compare two possible monetary policy regimes, transparent and opaque. For realistic values of parameters, it is shown that workers are better off under the opaque regime, whereas producers are better off under the transparent regime. This result is shown to hold in two cases, when the range of possible monetary transfers is small and when the range of possible monetary transfers is large.

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