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Monetary Policy with Uncertain Central Bank Preferences for Robustness

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  • Li Qin
  • Eleftherios Spyromitros
  • Moïse Sidiropoulos

Abstract

In this paper,we consider the transparency of monetary policy in a New Keynesian model with misspecification doubts. Model uncertainty allows us to identify a new source of central bank opacity, which refers to a lack of information about central bank’s preference for model robustness. Thus, taking into account this lack of transparency, we study its impacts on macroeconomic variables. We show that greater transparency can reduce the variability of output gap, inflation as well as that of their expected values.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2007-23.

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Date of creation: 2007
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Handle: RePEc:ulp:sbbeta:2007-23

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  1. Meixing Dai, 2012. "Static and Dynamic Effects of Central Bank Transparency," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2012-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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