Optimal Information Acquisition and Monetary Policy
نویسنده
چکیده
I study optimal monetary policy in an expectational Phillips Curve environment in which private agents optimally choose their amount of information pertinent to predicting policy. ARCH shocks produce interesting information acquisition (IA) dynamics. Under discretion, IA dynamics cause time-varying effectiveness of policy because of the expectational Phillips Curve; policy may be rendered completely ineffective. Greater economic volatility can induce fewer agents to be informed, though only in unstable equilibria. For an agent to become informed increases economic volatility; informed agents therefore impose a negative externality on others. Under commitment policy’s effectiveness is again time-varying, but policy is never completely ineffective. JEL classification: E52; E58; D83; D84
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