Inflation Expectations and Central Bank Communication with Unknown Prior

• Published in: IDEAS Working Paper Series from RePEc
• Main Authors: Okuda, Tatsushi, Tsuruga, Tomohiro
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2021
• Subjects: Central banks; Communication; Friction; Inflation rates

We construct a noisy information model of central bank communication on future inflation rates and highlight an informational friction that plays a key role in explaining several empirical properties of firms' inflation expectations. Using a survey of Japanese firms' inflation expectations...