Managing Expectations |
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| Authors: | ROBERT G KING YANG K LU ERNESTO S PASTÉN |
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| Institution: | 1. Robert G. King is from Boston University, Federal Reserve Bank of Richmond, and NBER (E‐mail: rking@bu.edu).;2. Yang K. Lu is from Boston University.;3. Ernesto S. Pastén is from IDEI‐Toulouse School of Economics and Banco Central de Chile. |
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| Abstract: | The idea that monetary policy is principally about “managing expectations” has taken hold in central banks around the world. Discussions of expectations management by central bankers, academics and by financial market participants frequently also include the idea that central bank credibility is imperfect. We adapt a familiar macroeconomic model so as to discuss key concepts in the area of expectations management. Our work also exemplifies a model construction approach to analyzing the dynamics of announcements, actions, and credibility that we think makes feasible a wide range of future investigations concerning the management of expectations. |
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| Keywords: | E3 E5 E6 managing expectations imperfect credibility monetary policy |
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