Does Transparency of Central Banks Produce Multiple Equilibria on Currency Markets?
AbstractA recent strand of literature shows that multiple equilibria in models of markets for pegged currencies vanish if there is slightly diverse information among traders; see Morris and Shin (2001). It is known that this approach works only if the common knowledge in the market is not too precise. This has led to the conclusion that central banks should try to avoid making their information common knowledge. We develop a model in which more transparency of the central bank implies better private information, because each trader utilises public information according to her own private information. Thus, transparency makes multiple equilibria less likely. Copyright The editors of the "Scandinavian Journal of Economics", 2006 .
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.
Volume (Year): 108 (2006)
Issue (Month): 1 (03)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Axel Lindner, 2003. "Does Transparency of Central Banks Produce Multiple Equilibria on Currency Markets?," IWH Discussion Papers 178, Halle Institute for Economic Research.
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- Axel Lindner, 2009.
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- Carin van der Cruijsen & Sylvester Eijffinger, 2007. "The economic impact of central bank transparency: a survey," DNB Working Papers 132, Netherlands Central Bank, Research Department.
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