I have a quite strong economic background, but i have some difficulties with this one.
Now, agreeing to rational expectations, if the monetary policy is fully predicted, changes shouldn't have any effect right? I completely agree with the fact that the central bank has to be credible for its policy to be effective, but i don't see why they say that non-anticipated moves have less impact.
I agree that it is better for central banks to have a stable policy in the long run and to be anticipated by financial markets in order to build credibility, but still i think that unexpected moves should have more impact than fully expected ones.
Anyone can help please?
Now, agreeing to rational expectations, if the monetary policy is fully predicted, changes shouldn't have any effect right? I completely agree with the fact that the central bank has to be credible for its policy to be effective, but i don't see why they say that non-anticipated moves have less impact.
I agree that it is better for central banks to have a stable policy in the long run and to be anticipated by financial markets in order to build credibility, but still i think that unexpected moves should have more impact than fully expected ones.
Anyone can help please?