Policy Announcement Design

61 Pages Posted: 8 Jan 2020 Last revised: 6 Aug 2020

See all articles by Anna Cieslak

Anna Cieslak

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Semyon Malamud

Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department; CREATES - Aarhus University

Date Written: December 16, 2019


We study the general problem of information design for a policymaker—a central bank—that communicates its private information (the ``state") to the public. We show that it is optimal for the policymaker to partition the state space into a finite number of ``clusters” and to communicate to the public to which cluster the state belongs. Optimal communication is more precise when the policymaker's beliefs conform with prior public expectations, whereas it is more vague in the case of divergence. We characterize the policymaker's trade-offs via a novel object—the information relevance matrix—and label its eigenvectors as principal information components (PICs). PICs with the highest eigenvalues determine the dimensions of information with the highest welfare sensitivity and, hence, are the ones about which the policymaker should be most precise.

Keywords: Central Bank Announcements, Learning, Bayesian Persuasion, Information Design

JEL Classification: D82, D83, E52, E58

Suggested Citation

Cieslak, Anna and Malamud, Semyon and Schrimpf, Andreas and Schrimpf, Andreas, Policy Announcement Design (December 16, 2019). Swiss Finance Institute Research Paper No. 20-17, Available at SSRN: https://ssrn.com/abstract=3504738 or http://dx.doi.org/10.2139/ssrn.3504738

Anna Cieslak

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919 660 7879 (Phone)

HOME PAGE: https://sites.google.com/site/ancieslak/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Semyon Malamud (Contact Author)

Ecole Polytechnique Federale de Lausanne ( email )

Lausanne, 1015

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Andreas Schrimpf

CREATES - Aarhus University ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel

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