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Endogenous Policy Announcement and Accountability for Inflation Target

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  • Keiichi Morimoto

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    (Graduate School of Economics, Osaka University)

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    Abstract

    In this paper, I show that accountability for inflation target will improve social welfare when the central bank makes transparency-opaqueness choices endogenously. The key elements are uncertainty of the firmsf informational quality, the opacity bias of constrained discretionay monetary policy under noisy information, and the role of harmful noisy public information. Based on the qualitative and quantitative result, I present a policy recommendation as to policy announcements and inflation targeting regime.

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0906.pdf
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    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-06.

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    Length: 20 pages
    Date of creation: Feb 2009
    Date of revision:
    Handle: RePEc:osk:wpaper:0906

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    Web page: http://www.econ.osaka-u.ac.jp/
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    Related research

    Keywords: asymmetric information; economic transparency; inflation targeting;

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    1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
    2. Woodford, Michael, 1999. "Optimal Monetary Policy Inertia," Manchester School, University of Manchester, vol. 67(0), pages 1-35, Supplemen.
    3. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    4. Jon Faust & Lars E.O. Svensson, 1999. "The Equilibrium Degree of Transparency and Control in Monetary Policy," NBER Working Papers 7152, National Bureau of Economic Research, Inc.
    5. Mervyn King, 2004. "The Institutions of Monetary Policy," NBER Working Papers 10400, National Bureau of Economic Research, Inc.
    6. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    7. Mervyn King, 2004. "The Institutions of Monetary Policy," American Economic Review, American Economic Association, vol. 94(2), pages 1-13, May.
    8. 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.
    9. Carl E. Walsh, 2007. "Optimal Economic Transparency," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 5-36, March.
    10. Walsh, Carl E, 2003. " Accountability, Transparency, and Inflation Targeting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 829-49, October.
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