Monetary Policy Transparency

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Monetary Policy Transparency AbstractThere has been a remarkable rise in the transparency of monetary policy during the last two decades. This paper provides an overview of the ways in which central banks have been providing more information about their monetary policymaking. Furthermore, it reviews the theoretical literature on monetary policy transparency and relevant empirical findings. The focus is on understanding two key developments, the notable increase in openness about macroeconomic prospects and the recent advance of forward policy guidance.JEL-Code: E520, E580.

Central Bank Credibility, Reputation and Inflation Targeting in Historical Perspective

“…Serious reservations have been raised about their methodology and the interpretation of their results byGeraats (2014).…”

Do Central Bank Communications Influence Survey of Professional Forecasters? An Empirical Investigation

“…They found that these had policy implications for the better conduct of monetary policy as they fulfilled the rationality properties, including efficiency and unbiasedness. Geraats (2014) drew out the importance of transparent monetary policy in reducing the private sector uncertainty and anchoring their expectations by making it more predictable. The study reviewed the theoretical literature and also studied the conceptual framework for central banks' transparency and empirical evidence of the abovementioned findings.…”

Central bank reputation, cheap talk and transparency as substitutes for commitment: Experimental evidence

“…We refer to this regime as one of "economic transparency" (ET) and in our experiment we will compare welfare under economic transparency with welfare under the pure (no economic transparency) discretionary and commitment regimes. As is well known from Geraats (2002Geraats ( , 2014, a discretionary regime with economic transparency combines a lack of credibility with a lack of flexibility since any policy responses of monetary policy to supply shocks are perfectly foreseen and, therefore cannot affect employment. The inflation bias in the discretionary regime with economic transparency is the same as in the discretionary regime without economic transparency, but the monetary policy response to supply shocks, is larger when there is economic transparency, causing a higher variation of inflation rates without stabilizing employment.…”

“…In particular, we explore the role of cheap talk, policy transparency, both cheap talk and policy transparency, and finally economic transparency in overcoming the inflationary bias under discretionary policy. Many of these mechanisms have been studied in the context of Barro-Gordon type monetary policy game set-ups (see, Geraats (2002Geraats ( , 2014 for surveys) and thus the environment we study is appropriate for an analysis of the effectiveness of such mechanisms. We find that of the various mechanisms we study, cheap talk alone results in some welfare improvement relative to the baseline discretionary environment, but the benefits of such a mechanism appear to decline with experience.…”