THE INFLUENCE OF INFORMATION FAILURE OF THE MONETARY AUTHORITIES ON THE EFFECTIVENESS OF COUNTER-CYCLICAL STABILIZATION POLICY

Adam P. Balcerzak

DOI: http://dx.doi.org/10.12775/EiP.2010.016

Abstract


With the huge advances in the field of theoretical and applied econometrics recent years have made a period of growing faith in the analytical and forecasting abilities of  economists, which resulted in a growing belief in the increasing ease of conducting counter-cyclical monetary policy and its high effectiveness. However, the thesis of this article says that the information ineffectiveness of monetary authorities related to uncertainty concerning correctness of current data, which is the basis for shaping the strength and direction of monetary action, may jeopardize the effectiveness of counter-cyclical stabilization policy. This problem is particularly important in the context of estimating the output gap between the actual and potential product. Despite the increasing quality of data and rapid advances in econometrics and the theory of monetary policy this problem is still valid.


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