Essays on information in monetary policy and business cycles
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2023-03-17
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Ribeiro, Marcel Bertini
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This thesis is composed of three essays. The first chapter deals with the signalling channel from the central bank: what information is conveyed to the market from an unexpected policy decision. We analyze the impact on inflation and output expectations revisions from the Brazilian Focus survey, using daily inputs from different institutions. We find some information effect (unexpected higher interest rate driving an increase in expectations) on inflation in the short-term monthly data and a less significant one for output growth in the quarterly frequency horizon. In the longer term, inflation and output expectations fall. Since this information effect may counteract the conventional one, monetary authority should carefully choose communication strategy. The second chapter studies dispersed information with higher-order expectations, analyzing if that kind of information friction is able to replace traditional price and wage frictions. In a simple frictionless model, dispersed information generates hump-shaped responses of output and inflation, whereas the traditional NK model do not. It also generates unemployment dynamics, otherwise non-existent in a full information environment. Adding traditional price and wage frictions further attenuates the responses, but hours worked and unemployment differ from the simple model. In comparison with a benchmark empirical model, most variable responses are qualitatively similar and both frictions, information and price/nominal wage stickiness, are important to explain unemployment response. The last chapter analyzes discretionary optimal monetary policy in a NK model where private agents and the central bank have incomplete information. Information is public and available either from exogenous shocks or endogenous variables. If the central bank adopts the optimal policy, it is unable to offset the effects of the technology and demand shocks, unlike the full information benchmark, hence there are welfare losses compared to this scenario. Central bank learning about the shocks can generate attenuated and gradual responses to them. A sensitivity analysis illustrates the importance of inflation signal precision in identification of the cost-push shock.
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Central bank Monetary policy Signalling channel Dispersed information Price and wage frictions Incomplete information Exogenous and endogenous signals Banco Central Política monetária Canal de sinalização Informação dispersa Rigidez de preço e salário Informação incompleta Sinais exógenos e endógenos