Optimal Transparency and Policy Intervention with Heterogeneous Signals and Information Stickiness.

This paper investigates optimal central bank disclosure in an economy in which only a proportion of firms adjusts prices each period to reflect current information. Such information comprises a firm-specific signal of the current state of aggregate demand and, potentially (depending on the transparency regime) a public signal disseminated by the central bank. The economy has two sources of price dispersion: first, the heterogeneity of the private signals of firms whose prices always reflect current information, and second, the non-adjustment of prices by firms that fail to update their information from period-to-period. Monetary policy is conducted by the central bank to maximize expected welfare, with the study's focus on the optimal degree of transparency. A key finding is that, for plausible values of model parameters, full transparency cannot be optimal: whether zero or partial transparency is desirable then depends on the proportion of firms failing to update their information each period. [ABSTRACT FROM AUTHOR]