G Sreekumar pays tribute to Dr. IG Patel on his 100th birthday:
Dr IG Patel made his mark in multiple careers: brilliant economist, economic bureaucrat, global civil servant, economic diplomat, central banker, and educationist.
Archive for November 18th, 2024
When Dr IG Patel turns 100
November 18, 2024The Central Banking Beauty Contest
November 18, 2024Expectations can play a significant role in driving economic outcomes, with central banks factoring market sentiment into policy decisions and market participants forming their own assumptions about monetary policy. But how well do central banks understand the expectations of market participants—and vice versa? Our model, developed in a recent paper, features a dynamic game between (i) a monetary authority that cannot commit to an inflation target and (ii) a set of market participants that understand the incentives created by that credibility problem.
In this post, we describe the game, a type of Keynesian beauty contest: its main novelty is that each side attempts, with varying degrees of accuracy, to forecast the other’s beliefs, resulting in new findings regarding the levels and trajectories of inflation.
Mostly Economics 
