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Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem

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  • Cukierman, Alex

Abstract

This paper surveys and evaluates alternative views regarding the desirable combination of accountability, credibility and transparency in the newly created ECB, including recent controversies regarding publication of minutes, Council member votes and ECB forecasts. The paper shows that premature publication of central bank forecasts reduces the ability of the bank to engage in stabilization policy while maintaining inflation reasonably close to its inflation objective. This is demonstrated for an economy in which the transmission mechanism is characterized by a conventional, expectations' augmented Phillips relation. When the transmission mechanism operates via a Keynesian real interest rate channel (of the type used in a number of econometric models, and compactly summarized in Svensson (1997a)) premature publication of forecasts does not affect expected social welfare provided only price stability and stabilization policy matter. But when (due, possibly, to detrimental effects of interest rate variability on financial stability) social welfare is also negatively related to interest rate variability, premature publication of forecasts, again, reduces expected social welfare.

Suggested Citation

  • Cukierman, Alex, 2000. "Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem," Foerder Institute for Economic Research Working Papers 275640, Tel-Aviv University > Foerder Institute for Economic Research.
  • Handle: RePEc:ags:isfiwp:275640
    DOI: 10.22004/ag.econ.275640
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    References listed on IDEAS

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    1. Lars E. O. Svensson, 1999. "Inflation Targeting: Some Extensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 337-361, September.
    2. de Haan, Jakob, 1997. "The European Central Bank: Independence, Accountability and Strategy: A Review," Public Choice, Springer, vol. 93(3-4), pages 395-426, December.
    3. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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