Abstract

I study the value to society of information about central bankers' preferences for inflation relative to output stabilization. I find that the value to society of information is only positive if bankers are “very” conservative. The reason is the following. More information has two effects. On the one hand it allows the public to make more accurate predictions, reducing surprise inflation and consequently the expected variance of output; on the other hand, information increases the expected variability of inflation. The latter effect dominates the former when bankers are not “sufficiently” conservative.

Keywords: Information; Bayes rule; Monetary policy

JEL classification codes: D8; E52; E58