Political Pressures and Monetary Mystique

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Political Pressures and Monetary Mystique

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Petra Geraats ()

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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 CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1999.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1999

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Paper
- Geraats, P.M., 2005. "Political Pressures and Monetary Mystique," Cambridge Working Papers in Economics 0557, Faculty of Economics, University of Cambridge. [Downloadable!]

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

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!]
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)
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)
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Other versions:
- 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)
Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March. [Downloadable!] (restricted)
Petra M. Geraats, 2005. "Transparency and Reputation: The Publication of Central Bank Forecasts," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
Geraats, P.M., 2004. "Modelling Stochastic Relative Preferences," Cambridge Working Papers in Economics 0468, Faculty of Economics, University of Cambridge. [Downloadable!]
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!]
Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March. [Downloadable!] (restricted)
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:
- Robert J. Barro, 1986. "Reputation in a Model of Monetary Policy with Incomplete Information," NBER Working Papers 1794, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2005. "Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033305, December.
Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September. [Downloadable!] (restricted)
S[empty]rensen, Jan Rose, 1991. "Political uncertainty and macroeconomic performance," Economics Letters, Elsevier, vol. 37(4), pages 377-381, December. [Downloadable!] (restricted)
Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December. [Downloadable!]
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.
Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, vol. 4(2), pages 91-102, 08. [Downloadable!] (restricted)
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)
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!]
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)
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:
- David Backus & John Driffill, 1984. "Inflation and Reputation," Working Papers 560, Queen's University, Department of Economics.
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.)

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)
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!]

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