Mewael F. Tesfaselassie
| Date of Ph.D. defense: | 16 December, 2005 |
| Title of thesis: | Communication, Learning and Optimal Monetary Policy |
| ISBN: | 90 5668 155 9 |
| Promotores: | Prof.dr. Sylvester Eijffinger and Prof. dr. Eric Schaling |
Abstract: Full text
Communication, Learning and Optimal Monetary Policy studies two issues that, broadly speaking, emphasize monetary policymaking under uncertainty. The first part
of the thesis has an institutional nature and looks at the effects of disclosing central bank forecasts when inflation expectations are forward-looking. It shows how central
bank credibility may determine disclosure policy. It also stresses mutual uncertainty between the central bank and the private sector, shedding light on the implications of
communication by the central bank for stabilization policy.
The second part of the thesis deals with interest rate policy under inflation targeting when there is uncertainty in the term structure of interest rates emanating from unobserved, possibly volatile, market sentiments. In situations where expectations depend on the state of the economy--the rate of inflation and the level of the output
gap, the central bank faces uncertainty about the degree of persistence in aggregate demand and inflation. Interestingly, the speed of learning about the degree of
persistence depends on the interest rate policy followed and the resulting variability in inflation and the output gap, where higher variability speeds up learning and improves
control of inflation in the long run. The analysis shows that passive and active learning scenarios have different implications for the degree of response of the rate of
interest to the state of the economy and thus for the short-run conduct of monetary policy.
Global / English