The relationship between central bank transparency and the quality of inflation forecasts: is it U-shaped?
AbstractA recent theoretical literature highlighted the potential dangers of further increasing information disclosure by central banks. This paper gives a continuous empirical investigation of the existence of an optimal degree of transparency in the lines of van der Cruijsen et al. We test a quadratic relationship between central bank transparency and the inflation persistence by introducing some technical and economic modifications. Particularly, we used three new measures of transparency. An appropriate U shape test that was made through a Stata routine, recently developed by Lind and Mehlum, indicates a robust optimal intermediate degree of transparency, but its level is not. These results were obtained using a panel of 11 OECD central banks under the period 1999-2009. The estimations were run using a bias corrected LSDVC, a newly recent technique developed by Bruno for short dynamic panels with fixed effects, extended to accommodate unbalanced data.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2012_02.
Date of creation: 02 Jan 2012
Date of revision:
Intermediate optimal transparency degree; inflation forecasts; inflation persistence; u-shaped relationship; non linear modeling; LSDVC; Principal Component Analysis.;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-27 (All new papers)
- NEP-CBA-2012-02-27 (Central Banking)
- NEP-FOR-2012-02-27 (Forecasting)
- NEP-MON-2012-02-27 (Monetary Economics)
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.:
- Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
- Forte, Antonio, 2009.
"The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade?,"
18309, University Library of Munich, Germany.
- Antonio Forte, 2010. "The European Central Bank, the Federal Reserve and the Bank of England: Is the Taylor Rule a useful benchmark for the last decade?," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, vol. 53(2), pages 1-31.
- Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia van Hove).
If references are entirely missing, you can add them using this form.