Monetary Policy Delegation and Transparency of Policy Targets: A Positive Analysis
AbstractWe show that, in a two-stage model of monetary policy with stochastic policy targets and asymmetric information, the transparency regime chosen by the central bank does never coincide with the regime preferred by society. Independent of society’s endogenous choice of delegation, the central bank reveals its inflation target and conceals its output target. In contrast, society would prefer either transparency or opacity of both targets. As a conclusion, the choice of the transparency regime should be part of the optimal delegation solution.
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Bibliographic InfoPaper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 113/2011.
Length: 32 pages
Date of creation: 01 Jun 2011
Date of revision:
central banking; monetary policy; communication; delegation; positive analysis;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-CBA-2011-06-11 (Central Banking)
- NEP-MAC-2011-06-11 (Macroeconomics)
- NEP-MON-2011-06-11 (Monetary Economics)
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