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Does better information about foreign shocks improve monetary policy?

Tan, Kang Yong; Tanaka, Misa

Description

This paper examines whether better information about foreign shocks leads to welfare-improving monetary policy using a stylised two-country New Keynesian general equilibrium model. We demonstrate that when terms of trade externality exist and national central banks have the incentives to shift terms of trade in their own favour, the equilibrium under imperfect information may be welfare superior relative to an equilibrium with perfect information. In addition, the welfare gains or losses from...[Show more]

CollectionsANU Research Publications
Date published: 2010
Type: Journal article
URI: http://hdl.handle.net/1885/62960
Source: Journal of International Money and Finance
DOI: 10.1016/j.jimonfin.2010.05.009

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