A Failure to Communicate? Central Banking Guidance in Good Times and Bad

The aim of this project is to better understand the impact of various forms of central bank communication. 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? Unlike existing research, the proposed program blends techniques from psychology and political science with an aim to better model and asses 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.