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Does Central Bank Transparency Impact Financial Markets? A Cross-country Econometric Analysis


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  • Marc Tomljanovich

    (Department of Economics, Drew University)

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    Blinder et al. (2001) argues that more open public disclosure of central bank policies may enhance the efficiency of markets. We examine this claim by studying for a set of seven industrialized countries whether selected central banks' moves toward more open disclosure during the 1990s improved or worsened the predictability of the corresponding national financial markets. Employing methodologies analogous to Campbell and Shiller (1991), we find that for all countries, the forecasting error has decreased for interest rates on the respective government bonds across most maturity lengths, and that the expectations hypothesis has generally performed better at the short end of the yield curve. Our results also tentatively show that the effects are stronger for central banks that made the move to greater disclosure, compared to those banks that resisted increasing the public's information set. These findings are consistent with Tabellini's (1987) view that central bank secrecy will hinder the smooth functioning of financial markets.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 73 (2007)
    Issue (Month): 3 (January)
    Pages: 791–813

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    Handle: RePEc:sej:ancoec:v:73:3:y:2007:p:791-813

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    Cited by:
    1. Diamondopoulos, John, 2012. "Transparency ‘footprints’ of Central Banks: The role of minutes/voting records," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 41(2), pages 235-247.
    2. Jubinski, Daniel & Tomljanovich, Marc, 2013. "Do FOMC minutes matter to markets? An intraday analysis of FOMC minutes releases on individual equity volatility and returns," Review of Financial Economics, Elsevier, Elsevier, vol. 22(3), pages 86-97.
    3. Chortareas, Georgios & Jitmaneeroj, Boonlert & Wood, Andrew, 2012. "Forecast rationality and monetary policy frameworks: Evidence from UK interest rate forecasts," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 22(1), pages 209-231.


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