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Central bank transparency: Does it matter?

  • Rhee, Hyuk Jae
  • Turdaliev, Nurlan

We study transparency of monetary policy in a dynamic stochastic general equilibrium model. The economy consists of many industries and experiences both supply and demand shocks. The central bank has private information regarding these shocks and releases its forecasts of shocks under the transparent regime. For a certain class of preferences social welfare does not depend on the degree of transparency and the policy that keeps the wedge between the marginal rate of substitution and the marginal product of labor constant across the states is shown to be optimal. However, in general the opaque regime welfare dominates the transparent regime.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 27 (2013)
Issue (Month): C ()
Pages: 183-197

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Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:183-197
DOI: 10.1016/j.iref.2012.09.014
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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