Does verbal communication add noise? Does it make it more likely that agents coordinate on the signal of the central bank, thereby crowding out private signals? This project blends techniques from psychology and political science with an aim to better model and assess the quality of the decision-making process that governs monetary policy. Policy makers generally agree that this is a critical area of research going forward beyond the necessary reforms to regulation and supervision of financial systems.
A Failure to Communicate? Central Bank Guidance in Good Times and Bad