Transparency and output stability: Empirical evidence
AbstractThis paper focuses on the empirical link between monetary policy transparency and output volatility. The questions addressed are: (i) Does transparency about policy processes stabilize output? (ii) Do different aspects of transparency differ qualitatively or quantitatively in terms of their effects on output volatility? Controlling for many standard structural sources of output stability, and using a data set of 80 countries over 1998 to 2007, our results show that transparency has a stabilizing influence on output volatility. However, it has less influence on output volatility than other structural sources of stabilization. Further, among the dimensions of transparency we find that operational transparency (covering control errors and macroeconomic disturbances) has the most robust stabilizing effect on output volatility. Whenever significant, political transparency (covering prioritization of objective and institutional arrangements) tends to increase output volatility, whereas other components have insignificant or negligible influence.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 13-010.
Length: 21 p.
Date of creation: 29 Jan 2013
Date of revision:
Publication status: Published by:
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Monetary Policy Transparency; Central Bank Independence; Transparency Index; Output Stabilization;
Find related papers by JEL classification:
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-CBA-2013-02-03 (Central Banking)
- NEP-MAC-2013-02-03 (Macroeconomics)
- NEP-MON-2013-02-03 (Monetary Economics)
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