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The Impact of Monetary and Financial Freedom on Monetary Policy Transparency in Low, Middle and High Income Countries

Author

Listed:
  • Sattari, Omid

    () (Ph.D. Candidate in Economics, Tarbiat Modares University)

  • Yavari, Kazem

    () (Associate Professor of Economics, Tarbiat Modares University)

  • Heydari, Hassan

    () (Assistant Professor of Economics, Tarbiat Modares University)

  • Etesami, Mansour

    () (Assistant Professor of Economics, Tarbiat Modares University)

Abstract

Theoretically speaking, monetary policy transparency refers to the informational symmetry between the central bank and the private sector. High degree of transparency reduces uncertainty, improves the private-sector inference about central bank goals, and increases the effectiveness of monetary policy. This study analyzes the impact of financial and monetary freedom on monetary policy transparency. A set of 102 countries -categorized in low, middle and high income groups have been investigated for the period 1998-2010, since the monetary policy transparency data are not available from 2010 onwards. The panel cointegation test suggests that the long run relationship between variables exists. The empirical findings suggest that while GDP per capita and trade freedom have a positive effect on transparency, the impact of financial freedom on transparency varieties in different income groups. Furthermore the monetary freedom exerts significant positive effect merely on middle income countries. These results imply that the reaction of monetary policy transparency to financial and monetary freedom might be depended to different economic structures.

Suggested Citation

  • Sattari, Omid & Yavari, Kazem & Heydari, Hassan & Etesami, Mansour, 2017. "The Impact of Monetary and Financial Freedom on Monetary Policy Transparency in Low, Middle and High Income Countries," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 3(4), pages 153-176, February.
  • Handle: RePEc:ris:qjatoe:0062
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    More about this item

    Keywords

    Monetary policy transparency; Panel cointegration; Financial freedom; Monetary freedom;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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