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Optimal Economic Transparency

  • Carl E. Walsh

    (Department of Economics, University of California, Santa Cruz)

In this paper, I explore the optimal extent to which the central bank should disseminate information among private agents. Individual firms are assumed to have diverse private information, and the central bank provides public information either implicitly, by setting its policy instrument, or explicitly, by making announcements about its short-run targets. The optimal degree of economic transparency is affected differently by cost and demand shocks. More-accurate central bank forecasts of demand shocks reduce optimal transparency, while more-accurate forecasts of cost shocks increase optimal transparency. Increased persistence in demand (cost) disturbances increases (reduces) optimal transparency.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 3 (2007)
Issue (Month): 1 (March)
Pages: 5-36

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Handle: RePEc:ijc:ijcjou:y:2007:q:1:a:1
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  1. Hyun Song Shin & Jeffery D. Amato, 2003. "Public and Private Information in Monetary Policy Models," Computing in Economics and Finance 2003 38, Society for Computational Economics.
  2. Jensen, Henrik, 2001. "Optimal Degrees of Transparency in Monetary Policymaking," CEPR Discussion Papers 2689, C.E.P.R. Discussion Papers.
  3. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November.
  4. Svensson, Lars & Faust, Jon, 1999. "The Equilibrium Degree of Transparency and Control in Monetary Policy," Seminar Papers 669, Stockholm University, Institute for International Economic Studies.
  5. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  6. Cornand, Camille & Heinemann, Frank, 2006. "Optimal Degree of Public Information Dissemination," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 158, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  8. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  9. Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006. "How transparent are central banks?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 1-21, March.
  10. Walsh, Carl E, 1999. "Announcements, Inflation Targeting and Central Bank Incentives," Economica, London School of Economics and Political Science, vol. 66(262), pages 255-69, May.
  11. Janet L. Yellen, 2005. "Policymaking on the FOMC: transparency and continuity," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep2.
  12. Camille Cornand & Romain Baeriswyl, 2006. "Monetary Policy and its Informative Value," FMG Discussion Papers dp569, Financial Markets Group.
  13. Christian Hellwig, 2002. "Public Announcements, Adjustment Delays, and the Business Cycle (November 2002)," UCLA Economics Online Papers 208, UCLA Department of Economics.
  14. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
  15. repec:ner:tilbur:urn:nbn:nl:ui:12-172467 is not listed on IDEAS
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