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Heterogeneous private sector information, central bank disclosure, and stabilization policy
Author(s) -
James Jonathan G.,
Lawler Phillip
Publication year - 2015
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12028
Subject(s) - central bank , private information retrieval , exploit , private sector , intervention (counseling) , stabilization policy , business , monetary economics , aggregate demand , economics , financial system , monetary policy , computer science , computer security , economic growth , psychology , psychiatry
Conventional wisdom has it that a central bank that uses an informational advantage to undertake active policy intervention can do as well, at least so far as real outcomes are concerned, by making its information publicly available and abstaining from stabilization. This notion is examined using a framework incorporating heterogeneous private sector information concerning aggregate demand shocks. An activist regime, in which the central bank exploits its own information to engage in stabilization, is found to be unambiguously superior to a noninterventionist regime, where the central bank maintains a constant setting of policy but publicly discloses its own information.