Do Monetary Policy Transparency, Independence and Credibility Enhance Macro- Financial Stability?

Spyromitros, Eleftherios; Tuysuz, Sukriye

doi:10.2139/ssrn.1309737

Cited by 7 publications

(5 citation statements)

References 61 publications

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“…This result echoes with those of Westelius () obtained in the standard New Keynesian framework, showing that imperfect transparency about the central bank's targets could simultaneously reduce the volatility of inflation and the output gap and moderate their dynamic adjustments. Our results are not contradictory with recent empirical studies (Demertzis and Hallet, ; Dincer and Eichengreen, , ; Geraats, ; van der Cruijsen et al ., ; Spyromitros and Tuysuz, ). The latter, while in most cases showing the positive effect of transparency on macroeconomic performance, do not go far enough, due to lack of data, to appreciate the effects of uncertainty about the relative weight that central banks assign to output‐gap stabilization.…”

Section: Introductionmentioning

confidence: 97%

Static and Dynamic Effects of Central Bank Transparency

Dai

2014

Bulletin of Econ Res

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Using a New Keynesian framework, this paper shows that, under optimal discretion and optimal pre-commitment in a timeless perspective, imperfect transparency about the relative weight assigned by the central bank to output-gap stabilization generally reduces the average reaction of inflation to inflation shocks and the volatility of inflation, but increases those of the output gap in static and dynamic terms, and more so when inflation shocks are highly persistent. When inflation shocks are moderately persistent, opacity could improve social welfare if the weight assigned to output-gap stabilization is low and this is more likely under pre-commitment than under discretion.

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Section: Introductionmentioning

confidence: 97%

Static and Dynamic Effects of Central Bank Transparency

Dai

2014

Bulletin of Econ Res

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“…The impact of central bank transparency on the economy has been investigated by several economists (e.g. Geraats, 2006; de Mendonça and Simão Filho, 2008; Demertzis and Hughes-Hallet, 2007, 2015; Spyromitros and Tuysuz, 2012; Neuenkirch, 2013; Dincer and Eichengreen, 2014; Papadamou et al , 2014a, b, 2015; Papadamou and Arvanitis, 2015). In general, these studies point out that transparency brings benefits to the economy, especially in relation to inflation and inflation expectations.…”

Section: Introductionmentioning

confidence: 99%

Central bank transparency, inflation targeting and monetary policy: a panel data approach

Montes

Gea

2018

JES

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Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

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“…Finally, by linking a financial component of the monetary transmission mechanism with central bank transparency, our paper is related to a new trend in empirical studies focusing on the benefits of transparency in promoting macroeconomic and financial stability (Horváth & Vaško, ; Papadamou, Sidiropoulos, & Spyromitros, , 2015, 2017; Spyromitros & Tuysuz, ).…”

Section: Introductionmentioning

confidence: 99%

Central bank transparency under the cost channel

Dai

Zhang

2017

International Finance

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This paper studies the implications of information disclosure about the central bank's preferences regarding inflation and output‐gap stabilization in the presence of the cost channel of monetary transmission. Through this channel, higher interest rates translate into higher marginal costs of production and, finally, into higher inflation. Conventional wisdom has it that whether the central bank is transparent alters the effects of cost‐push or supply shocks, but does not change the fact that demand shocks are fully offset by optimal monetary policy. We show that this view is incorrect in the presence of a cost channel, since the latter not only affects how transparency interacts with cost‐push shocks, but also makes it interact with demand shocks. Moreover, the desirability of full transparency when shocks are persistent is significantly reduced by the presence of the cost channel.

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Do Monetary Policy Transparency, Independence and Credibility Enhance Macro- Financial Stability?

Cited by 7 publications

References 61 publications

Static and Dynamic Effects of Central Bank Transparency

Static and Dynamic Effects of Central Bank Transparency

Central bank transparency, inflation targeting and monetary policy: a panel data approach

Central bank transparency under the cost channel

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