Political Pressures and Monetary Mystique

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Political Pressures and Monetary Mystique

Author Info

Geraats, P.M.

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Petra Maria Geraats

Abstract

Central bank independence and transparency have become best practice in monetary policy. This paper cautions that transparency about economic information may not be beneficial in the absence of central bank independence. The reason is that it reduces monetary uncertainty, which could make the government less inhibited to interfere with monetary policy. In fact, a central bank could use monetary mystique to obtain greater insulation from political pressures, even if the government faces no direct cost of overriding. As a result, economic secrecy could be beneficial and provide the central bank greater political independence.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0557.

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Length: 33
Date of creation: Dec 2005
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Handle: RePEc:cam:camdae:0557

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Paper
- Petra Geraats, 2007. "Political Pressures and Monetary Mystique," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-12-14 (All new papers)
NEP-CBA-2005-12-14 (Central Banking)
NEP-MAC-2005-12-14 (Macroeconomics)
NEP-MON-2005-12-14 (Monetary Economics)
NEP-POL-2005-12-14 (Positive Political Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Eijffinger, Sylvester C W & Hoeberichts, Marco, 2002. "Central Bank Accountability and Transparency: Theory and Some Evidence," International Finance, Blackwell Publishing, vol. 5(1), pages 73-96, Spring. [Downloadable!] (restricted)
Other versions:
- Eijffinger, Sylvester C. W. & Hoeberichts, Marco M., 2000. "Central Bank accountability and transparency : theory and some evidence," Discussion Paper Series 1: Economic Studies 2000,06, Deutsche Bundesbank, Research Centre. [Downloadable!]
repec:bep:mactop:v:5:y:2005:i:1:p:1277-1277 is not listed on IDEAS
Jon Faust & Lars E.O. Svensson, 1998. "Transparency and credibility: monetary policy with unobservable goals," International Finance Discussion Papers 605, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Other versions:
- Faust, J. & Svensson, L.E.O., 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Papers 636, Stockholm - International Economic Studies.
- Faust, Jon & Svensson, Lars E O, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," CEPR Discussion Papers 1852, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Jon Faust & Lars E. O. Svensson, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," NBER Working Papers 6452, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Svensson, Lars E.O. & Faust, John, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Seminar Papers 636, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Faust, Jon & Svensson, Lars E O, 2001. "Transparency and Credibility: Monetary Policy with Unobservable Goals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 369-97, May.
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Robert J. Barro & David B. Gordon, 1983. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August. [Downloadable!] (restricted)
Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January. [Downloadable!] (restricted)
Other versions:
- Marvin Goodfriend, 1985. "Monetary mystique : secrecy and central banking," Working Paper 85-07, Federal Reserve Bank of Richmond. [Downloadable!]
Barro, Robert J., 1986. "Reputation in a model of monetary policy with incomplete information," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 3-20, January. [Downloadable!] (restricted)
Other versions:
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Petra M. Geraats, 2007. "The Mystique of Central Bank Speak," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 37-80, March. [Downloadable!]
Other versions:
- Petra Geraats, 2006. "The Mystique of Central Bank Speak," Working Papers 123, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
- Geraats, P.M., 2005. "The Mystique of Central Bank Speak," Cambridge Working Papers in Economics 0543, Faculty of Economics, University of Cambridge. [Downloadable!]
Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June. [Downloadable!] (restricted)
Other versions:
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Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November. [Downloadable!] (restricted)
Geraats, P.M., 2004. "Modelling Stochastic Relative Preferences," Cambridge Working Papers in Economics 0468, Faculty of Economics, University of Cambridge. [Downloadable!]
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Gersbach, Hans & Hahn, Volker, 2005. "Voting Transparency in a Monetary Union," CEPR Discussion Papers 5155, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Hans Gersbach & Volker Hahn, 2009. "Voting Transparency in a Monetary Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 831-853, 08. [Downloadable!] (restricted)
Beetsma, Roel M W J & Jensen, Henrik, 2003. " Why Money Talks and Wealth Whispers: Monetary Uncertainty and Mystique: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(1), pages 129-36, February.
Jensen, Henrik, 2002. " Optimal Degrees of Transparency in Monetary Policymaking," Scandinavian Journal of Economics, Blackwell Publishing, vol. 104(3), pages 399-422, September. [Downloadable!] (restricted)
Other versions:
- Henrik Jensen, . "Optimal Degrees of Tranaparency in Monetary Policymaking," EPRU Working Paper Series 01-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
- Jensen, Henrik, 2001. "Optimal degrees of transparency in monetary policymaking," Discussion Paper Series 1: Economic Studies 2001,04, Deutsche Bundesbank, Research Centre. [Downloadable!]
- Jensen, Henrik, 2001. "Optimal Degrees of Transparency in Monetary Policymaking," CEPR Discussion Papers 2689, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Nergiz Dincer & Barry Eichengreen, 2009. "Central Bank Transparency: Causes, Consequences and Updates," NBER Working Papers 14791, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Cukierman, Alex, 2007. "The Limits of Transparency," CEPR Discussion Papers 6475, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Alex Cukierman, 2007. "The limits of transparency," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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