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Monetary Policy Delegation and Transparency of Policy Targets: A Positive Analysis

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  • Hielscher, Kai

    ()
    (Helmut Schmidt University, Hamburg)

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    Abstract

    We 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 Info

    Paper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 113/2011.

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    Length: 32 pages
    Date of creation: 01 Jun 2011
    Date of revision:
    Handle: RePEc:ris:vhsuwp:2011_113

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    Related research

    Keywords: central banking; monetary policy; communication; delegation; positive analysis;

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