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Actual versus Perceived Transparency: The Case of the European Central Bank

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  • Cruijsen, C.A.B. van der
  • Eijffinger, S.C.W.

    (Tilburg University)

Abstract

Central banks have become more and more transparent about their monetary policy making process. In the central bank transparency literature the distinction between actual and perceived transparency is often lacking. However, as perceptions are crucial for the actions of economic agents this distinction matters. We investigate the mismatch between actual and perceived transparency and its relevance by analyzing data of a Dutch household survey on the European Central Bank's transparency. A discrepancy between actual and perceived transparency exists because of incomplete and incorrect transparency knowledge and other (psychological) factors. We find that respondents with relatively high transparency perceptions are more likely to have more trust in the ECB and better alligned inflation perceptions and expectations. Therefore, it might be beneficial for a central bank to increase transparency perceptions, either by improving its actual disclosure practices or by focusing on its transparency strengths in its communicationpolicy.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-357920.

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Length: 37
Date of creation: 2008
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Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-357920

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Web page: http://www.tilburguniversity.edu/

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  1. Eijffinger, Sylvester C W & van der Cruijsen, Carin A B, 2007. "The Economic Impact of Central Bank Transparency: A Survey," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6070, C.E.P.R. Discussion Papers.
  2. Ulrike Malmendier & Geoffrey Tate, 2005. "CEO Overconfidence and Corporate Investment," Journal of Finance, American Finance Association, American Finance Association, vol. 60(6), pages 2661-2700, December.
  3. Eijffinger, S.C.W. & Geraats, P., 2006. "How transparent are central banks?," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-172467, Tilburg University.
  4. Demertzis, Maria & Andrew Hughes Hallett, 2003. "Central Bank Transparency in Theory and Practice," Royal Economic Society Annual Conference 2003, Royal Economic Society 56, Royal Economic Society.
  5. Geraats, P.M., 2005. "The Mystique of Central Bank Speak," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0543, Faculty of Economics, University of Cambridge.
  6. Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. 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.
  8. Céline Christensen & Peter Els & Maarten Rooij, 2006. "Dutch Households’ Perceptions of Economic Growth and Inflation," De Economist, Springer, Springer, vol. 154(2), pages 277-294, June.
  9. Robert J. Shiller, 1997. "Why Do People Dislike Inflation?," NBER Chapters, National Bureau of Economic Research, Inc, in: Reducing Inflation: Motivation and Strategy, pages 13-70 National Bureau of Economic Research, Inc.
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  11. Jakob de Haan & Sylvester C. W. Eijffinger & Sandra Waller, 2005. "The European Central Bank: Credibility, Transparency, and Centralization," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262042266, December.
  12. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(483), pages 532-565, November.
  13. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 080, Institute for Empirical Research in Economics - University of Zurich.
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Cited by:
  1. van der Cruijsen, Carin A.B. & Eijffinger, Sylvester C.W. & Hoogduin, Lex H., 2010. "Optimal central bank transparency," Journal of International Money and Finance, Elsevier, Elsevier, vol. 29(8), pages 1482-1507, December.
  2. Federica Teppa & Corrie Vis, 2012. "The CentERpanel and the DNB Household Survey: Methodological Aspects," DNB Occasional Studies, Netherlands Central Bank, Research Department 1004, Netherlands Central Bank, Research Department.

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