The Economic Impact of Central Bank Transparency: A Survey

Abstract

We provide an up-to-date overview of the literature on the desirability of central bank transparency from an economic viewpoint. Since the move towards more transparency, a lot of research on its e¤ects has been carried out. First, we show how the theoretical literature has evolved, by looking into branches inspired by Cukierman and Meltzer (1986) and by investigating several, more recent, research strands (e.g. coordination and learning). Then, we summarize the empirical literature which has been growing more recently. Last, we discuss whether:-the empirical research resolves all theoretical question marks,-how the …ndings of the literature match the actual practice of central banks, and-where there is scope for more research.

Uncertainty and central bank transparency: A non-Bayesian approach

“…In this section, we consider the welfare effect 17 . As in the existing literature 18 , we assume that the random fluctuations of the CB's utility function are not part of society's utility function.…”

“…First, consider the term min P ∈R(S) E P U S in (17). From (16), this is equivalent to max P ∈R(S) E P h γ 0 1−γ 0 (1 − γ) 2 + γ 2 i .…”

The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?

“…The public can then use directly the central bank forecast as its own. Technically, (1), (2) and (5) are solved under rational expectations with the same timing assumptions as in V1 and V2.…”

Managing financial market expectations: The role of central bank transparency and central bank communication

“…The empirical literature mostly finds beneficial effects of transparency. Van der Cruijsen and Eijffinger (2010) review the literature and conclude that transparency (1) improves consensus across forecasters, (2) lowers the level of inflation and anchors inflation expectations, (3) improves the credibility, reputation, and flexibility of central banks, (4) has no obvious influence on output and output variability, and (5) improves policy anticipation. 2 The objective of this paper is related to the last point, 'policy anticipation'.…”