This article analyses the effects of economic transparency on the optimal monetary policy in an economy affected by demand shocks. In an environment of imperfect common knowledge, demand shocks create a trade-off between stabilizing the price level and stabilizing the output gap. The monetary...

Several phases of financial crises contain strategic elements than can be directly tested by laboratory experiments. This paper summarizes what we can learn from experiments on the formation of bubbles, on herding behavior, bank runs, and on the effects of providing public information in...