Published by the Reserve Bank of Australia during the week, an interesting read for the weekend:
- Central banks analyse copious amounts of information to assess the economic outlook to then set monetary policy. So, could changes in monetary policy reveal some additional information about the economic outlook to the public? This channel is known as the 'information effect'.
Huh, I wonder if central banks think they are getting much information that is not available to private-sector analysts out there? Gonna have to say I doubt it. Still, that's the premise that is examined in the paper. The spoiler is:
- For most monetary policy communication, at least in equity markets, the information effect is not an important channel of monetary policy.
But there are a few twists and turns in the tale if you are interested.
Link here:
