Monetary Policy Transparency, Inflation and the Sacrifice Ratio
We examine how inflation and the costs associated with disinflation episodes are related to monetary policy transparency. We develop a simple model that demonstrates how transparency may result in lower inflation. Our empirical results show that in general, transparency may be associated with lower inflation across a broad range of countries and frameworks. In addition, the output costs of disinflation, as measured by the sacrifice ratio, are negatively related to the degree of monetary policy transparency. The capacity of the central bank to limit the monetary financing of government deficits also has an inflation-reducing effect. Considering transparency as a possible determinant of cross-country differences in the costs of disinflation represents a new contribution to the literature, especially given the failure of previous empirical research to find a robust negative relationship between other aspects of the central bank's institutional design and the sacrifice ratio. Copyright @ 2002 by John Wiley & Sons, Ltd. All rights reserved.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 7 (2002)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/1076-9307/|
|Order Information:||Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307|
When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:7:y:2002:i:2:p:141-55. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.