Presenter: Jennifer La’O
Affiliation: Department of Economics, Columbia University
Date: June 28, 2021
Time: 15:00 IDT (UTC/GMT+3)
Abstract: We study optimal monetary policy and central bank communication when firms make nominal pricing decisions under uncertainty and when the monetary authority likewise has incomplete information about the current economic state. We find that the optimal monetary policy implements flexible-price allocations despite this multitude of measurability constraints; we explore a series of different implementations. Away from such policies, we find that public communication by the central bank is welfare-improving as long as either firm information or central bank information is sufficiently precise.