Monetary Policy Transparency in the Inflation Targeting (original) (raw)

The Role of Transparency in the Conduct of Monetary Policy

OECD Economics Department Working Papers, 2009

In contrast to the once prevailing norm of secrecy and opaqueness, transparency has now become one of the main features characterising the conduct of monetary policy. Detailed analysis of eleven OECD central banks shows that communication practices have converged markedly in the direction of ever greater transparency. Empirical evidence is consistent with the hypothesis that transparency contributes to the successful conduct of monetary policy: higher transparency is a typical element of monetary frameworks that are associated with better anchored inflation expectations and more stable inflation outcomes. Despite this general trend toward increased transparency, however, central banks differ in actual communication practices. There is a particular divergence with respect to transparency in the decision-making process and communication regarding future policy inclination. Although the appropriate degree of transparency in these areas is an unsettled issue, the fact that financial dislocation is impairing conventional monetary transmission makes these two areas critical for policy implementation. JEL codes: E31; E50; E52; E58. other members of the Economics Department. They are also indebted to Douglas Sutherland for his support on the random weighting technique. They would also like to thank Debra Bloch and Catherine Lemoine for statistical assistance and Susan Gascard, Veronica Humi and Anne Eggimann for secretarial assistance. Needless to say, any remaining errors fall under the responsibility of the authors.

Actual versus Perceived Transparency: The Case of the European Central Bank

2008

Actual Versus Perceived Central Bank Transparency: The Case of the European Central Bank

SSRN Electronic Journal, 2000

Central banks have become more and more transparent about their monetary policy making process. In the central bank transparency literature the distinction between actual and perceived central bank transparency is often lacking. However, as perceptions are crucial for the actions of economic agents this distinction matters. A discrepancy between actual and perceived transparency may exist because of incomplete or incorrect transparency knowledge and other (psychological) factors. Even financial experts, the most important channel through which the central bank can influence the economy, might suffer from misaligned perceptions. We investigate the mismatch between actual and perceived transparency and its relevance by analyzing data of a Dutch household survey on the European Central Bank's transparency. To benefit from higher transparency perceptions the European Central Bank might feel tempted to stress its transparency strengths, but hide its transparency weaknesses.

Monetary Policy Transparency:Lessons from Germany and the Eurozone

The conduct of monetary policy emphasises institutional arrangements which make monetary policy decision-making more ‘transparent’. Judged by these institutional features neither the Bundesbank, nor the ECB, score very highly. We test for (i) agents’ average ability to anticipate policy rate changes under the Bundesbank and the ECB and (ii) and agents’ forecasting unanimity of money market rates. Rising forecasting uncertainty may either be due to a lack of ECB transparency or to larger inflation and growth forecasting errors. Our results indicate that inflation forecast spreads widened amongst private agents and that inflation forecasting uncertainty increased the forecasting spread of money market rates

Optimal Transparency of Monetary Policy

The Optimal Transparency of Monetary Policy, 2017

In this study, optimal transparency is examined in terms of monetary policy. Since about the last two decades, more emphasis has been placed on implementations of the monetary policy transparency for the success of the inflation targeting regime adopted by many countries. It is considered that transparency will be beneficial, such as the ability of central banks to make better predictions of economic units and to increase the credibility and persuasion power of the central bank. It is assumed that practices in this context will produce better results for the effectiveness of the monetary policy, but there is not always an expected outcome for an increase in the level of transparency. With this study, the negative effects of high transparency are put forth and what the optimal level of transparency should be is dealt with. In addition, the development of the central bank of the republic of Turkey in the context of transparency is stated.

The Optimal Transparency of Monetary Policy

International Journal of Academic Research in Economics and Management Sciences, 2017

Central Bank Transparency: A Market Indicator

It is widely believed that monetary policy outcomes are generally enhanced if the conduct of policy by the central bank is widely understood by other agents in the economy. This widespread belief has given rise to a number of attempts to measure the ‘transparency’ of monetary policy in various regimes. Unsurprisingly, the degree of transparency depends upon a variety of institutional arrangements peculiar to each monetary regime. Thus, the dominant approach to measurement relies upon identifying a range of legal and other formal characteristics - in a manner very reminiscent of the central bank independence literature of fifteen years ago. This approach is not entirely satisfactory, however, since it is agents’ perceptions of the degree of transparency that matters if transparency is to have any effect on policy outcomes. This has given rise to other methods of measurement which survey the views of agents. While this is potentially more relevant, it is obviously possible that their ...

Three different approaches to transparency in monetary policy

Economia Politica, 2015

We present three different views of imperfect transparency in monetary policy: political transparency, economic transparency and constructive ambiguity. The first two show that transparency reduces the variability of inflation and the output gap but does not affect their average levels. But if the Central Bank is unable to commit to one particular set of preferences for all circumstances, then in line with the hypothesis of constructive ambiguity we find that both the levels and the variability of output and inflation will be affected-which means that this form of imperfect transparency could be used strategically. An empirical examination of these results, based on an index constructed by Eijffinger and Geraats, shows that macroeconomic averages are not much affected by transparency. But transparency appears to reduce the variability of inflation while increasing the variability of output. That suggests that Central Banks may in fact exploit constructive ambiguity when they try to be transparent. Keywords Ambiguity Á Imperfect transparency Á Independent monetary policies JEL Classification E52 Á E58 Views expressed are our own and do not necessarily reflect those of the institutions we are affiliated with.

The impact of central bank transparency on inflation expectations

European Journal of Political Economy, 2007

We investigate how the link between inflation and inflation expectations alters with increasing transparency. Our motivation stems from the belief that changes in the institutional features or operations of the central bank affect, first and foremost, the way that private agents form their expectations about the future behavior of the central bank and only through them, inflation. To examine the link between inflation and inflation expectations, we apply the framework used by . The macroeconomic effects of inflation targeting. Federal Reserve Bank of St. Louis Review 86, 51-80.] and make use of the recent development of quantitative measures for transparency. We find evidence that transparency helps fixing private sector inflation expectations.

Monetary Policy Transparency in the Inflation Targeting (original) (raw)

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