In this paper we examine the consequences of having a Central Bank whose preferences are state contingent. This has been identified in the literature as a Central Bank that is 'rationally inattentive' or 'constructively ambiguous'. The new feature in this paper is that we show how the private...

In this paper we examine the consequences of having a Central Bank whose preferences are state contingent. This has variously been identified in the literature as a Central Bank that is "rationally inattentive", "risk averse", or "constructively ambiguous". The new feature in this paper is that...