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Productivity growth, transparency, and monetary policy

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  • Muto, Ichiro

Abstract

This study examines whether central bank transparency about views of future productivity growth contributes to stabilizing macroeconomic fluctuations. In a standard New Keynesian model, the central bank and private agents make their subjective estimates on the persistence of productivity growth. In this situation, if private agents believe that the central bank's projections include forecast errors on future productivity growth, these beliefs can destabilize private agents' own expectations because the central bank's forecast errors may lead to policy mistakes in the future. Consequently, central bank transparency does not necessarily stabilize the variations of the output gap and inflation rate. The central bank should respond strongly to the inflation rate, if the impact of transparency is uncertain.

Suggested Citation

  • Muto, Ichiro, 2013. "Productivity growth, transparency, and monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 329-344.
  • Handle: RePEc:eee:dyncon:v:37:y:2013:i:1:p:329-344
    DOI: 10.1016/j.jedc.2012.08.005
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    Cited by:

    1. Tesfaselassie, Mewael F., 2014. "Trend growth and learning about monetary policy rules," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 241-256.
    2. Christoph S. Weber, 2017. "The Unemployment Effect of Central Bank Transparency," Working Papers 172, Bavarian Graduate Program in Economics (BGPE).
    3. Williams, Andrew, 2015. "A global index of information transparency and accountability," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 804-824.
    4. Muto, Ichiro, 2012. "A Simple Interest Rate Model with Unobserved Components: The Role of the Interbank Reference Rate," MPRA Paper 43220, University Library of Munich, Germany.

    More about this item

    Keywords

    Monetary policy; Transparency; Productivity growth;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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