Economic transparency and effectiveness of monetary policy
AbstractPurpose – The purpose of this paper is to study if the central bank (BC) communications affect the effectiveness of the monetary policy. Design/methodology/approach – For this analysis, a new Keynesian theoretical model and the ordinary least squared methodology were used. The objective to be achieved was to determine if there is some effect of economic transparency on accountability, inflation average, output gap, interest and central bank credibility. Findings – The results highlighted that central banks with greater transparency contribute to decrease inflation rate and interest rate. The findings denote that an increase in the information quality (clarity) implies a significant change in the rate of readjustment of market expectations. Furthermore, central bank transparency contributes to anchor the public expectations and to affect long-run interest rates. Research limitations/implications – Impulse-answer research was employed to show how the central bank transparency affects the credibility of monetary authorities. Practical implications – This paper suggests that the central bank publicizes its outlook, its policy monetary decisions, its expectations and its preferences. Originality/value – The originality of the paper resides in the fact that empirical and theoretical studies were made in the single work. Also, new results were found denoting that economic transparency reduces uncertainty effect and increases the power of incentive contract made between the BC and public.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 34 (2007)
Issue (Month): 6 (November)
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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- de Mendonça, Helder Ferreira & de Guimarães e Souza, Gustavo José, 2012. "Is inflation targeting a good remedy to control inflation?," Journal of Development Economics, Elsevier, vol. 98(2), pages 178-191.
- Gabriel Barros Tavares Peixoto & Gabriel Caldas Montes, 2014. "Risk-Taking Channel, Bank Lendingchannel And The “Paradox Of Credibility”: Empirical Evidence For Brazil," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 030, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- de Mendonça, Helder Ferreira & de Siqueira Galveas, Karine Alves, 2013. "Transparency and inflation: What is the effect on the Brazilian economy?," Economic Systems, Elsevier, vol. 37(1), pages 69-80.
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