We examine whether it is sufficient for central banks to observe and forecast nominal variables only. Analyzing the interplay of wage-setting unions and a central bank we show that although central banks may not gain more information by directly acquiring data about indicators of real shocks in...

This Paper compares the social efficiency of monetary targeting and inflation targeting when central banks may have private information on shocks to money demand and, because of verifiability problems, the transparency solution is not feasible. Under inflation targeting and monetary targeting,...

We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers׳ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation expectations more...

We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation expectations more...

We integrate a monetary policy committee into a New Keynesian model to assess the consequences of the committee's institutional characteristics for welfare. First, we prove that uncertainty about the committee's future composition may be desirable. Second, we show that longer terms of central...

We investigate the optimal design of a committee in a model with the endogenous participation of experts who have private information about their own abilities. We study three different dimensions of committee design: members' wages, the number of seats, and the communication system. We show...