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Conference Paper
Monetary policy and its informative value
This paper analyzes the welfare effects of economic transparency in a model of monopolistic competition with imperfect common knowledge on the shocks affecting the economy where the central bank has no inflationary bias. Monetary policy entails a dual role, as an action that stabilizes the economy and as a public signal that partially reveals to firms the central bank?s assessment about the economy. Firms are unable to perfectly disentangle the central bank?s signals responsible for the instrument: the central bank optimally balances the action and information purposes of its instrument. We ...