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Central bank transparency: Does it matter?

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  • Rhee, Hyuk Jae
  • Turdaliev, Nurlan

Abstract

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.

Suggested Citation

  • Rhee, Hyuk Jae & Turdaliev, Nurlan, 2013. "Central bank transparency: Does it matter?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 183-197.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:183-197
    DOI: 10.1016/j.iref.2012.09.014
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    7. Lafuente, Juan A. & Pérez, Rafaela & Ruiz, Jesús, 2014. "Time-varying inflation targeting after the nineties," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 400-408.
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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