The Three E’s of Public Communication about Monetary Policy∗

In this paper we present both theoretical and empirical evidence on communication with the general public. The models, based on the Rational Inattention framework, provide guidance for policy makers as well as highlighting some important risks in communicating simply with a broader audience. In particular, in a model where trust and engagement are linked, attempts to engage a wider audience may ultimately lower welfare. Guided by the model, we discuss the 3 E’s of public communication: Explanation, Engagement and Education. Central banks have made great strides in all three, but numerous challenges remain.