Central banks speak opaquely to avoid overreaction – ECB study
Authors say institutions tend to communicate more clearly when they know their reputations are low
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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