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Transparency in monetary policy: A general equilibrium approach

  • Turdaliev, Nurlan
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    We study a general equilibrium model with a central bank (CB) and two groups of agents, producers and workers. The CB maximizes a weighted average of utilities of the two groups. The CB has two possible types, one favoring workers and the other favoring producers. The CB's type is private information. We compare two possible monetary policy regimes, transparent and opaque. For realistic values of parameters, it is shown that workers are better off under the opaque regime, whereas producers are better off under the transparent regime. This result is shown to hold in two cases, when the range of possible monetary transfers is small and when the range of possible monetary transfers is large.

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    File URL: http://www.sciencedirect.com/science/article/B6VB1-4VJS6XR-1/2/e4c577c4a41c2382beedffb4b7922b75
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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 26 (2009)
    Issue (Month): 3 (May)
    Pages: 608-613

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    Handle: RePEc:eee:ecmode:v:26:y:2009:i:3:p:608-613
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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