New Data from University of Minnesota Illuminate Findings in Investment (Central Bank Reputation With Noise): Investment

2026 MAR 10 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- New research on Investment is the subject of a report. According to news reporting from Minneapolis, Minnesota, by NewsRx journalists, research stated, “This paper presents a model of central bank reputation where inflation is a noisy function of central bank actions. In the model, a central bank can be ‘hawkish’, with a relatively high penalty for taking inflationary actions, or ‘dovish’, with a relatively low penalty.”

The news correspondents obtained a quote from the research from the University of Minnesota, “The central bank’s type varies according to a Markov process, and its reputation is the Bayesian posterior of households that it is a hawkish type. We show analytically that no Markov pooling equilibria exist: hawkish and dovish central banks must act differently. We then argue that without sufficient noise, it is difficult for Markov separating equilibria to exist either.”

According to the news reporters, the research concluded: “But with sufficient noise, we show computationally that pure strategy separating equilibria exist and have appealing characteristics: both hawkish and dovish banks choose lower inflationary actions than they would in the absence of reputation considerations, and both types are most aggressive in attempting to gain a hawkish reputation when their current reputation is middling.”

This research has been peer-reviewed.

For more information on this research see: Central Bank Reputation With Noise. Journal of Monetary Economics, 2026;158. Journal of Monetary Economics can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Monetary Economics - http://www.journals.elsevier.com/journal-of-monetary-economics/)

Our news journalists report that additional information may be obtained by contacting Christopher Phelan, University of Minnesota, Minneapolis, MN 55455, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jmoneco.2026.103906. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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