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Why Adopt Transparency? The Publication of Central Bank Forecasts

  • Geraats, Petra M.

Recently, several central banks have abandoned the usual secrecy in monetary policy and become very transparent. This paper provides an explanation for this puzzling fact, focusing on the disclosure of central bank forecasts. It shows that transparency reduces the inflationary bias and gives the central bank greater flexibility to respond to shocks in the economy. Furthermore, it makes it easier for a central bank to build reputation. To achieve these benefits of transparency it is generally necessary to publish the conditional central bank forecasts for both inflation and output.

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Paper provided by Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley in its series Center for International and Development Economics Research, Working Paper Series with number qt0hw7h7cp.

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Date of creation: 04 Jul 2000
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Handle: RePEc:cdl:ciders:qt0hw7h7cp
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  1. Willem H. Buiter, 1999. "Alice in Euroland," LSE Research Online Documents on Economics 20226, London School of Economics and Political Science, LSE Library.
  2. Jon Faust & Lars E.O. Svensson, 1999. "The Equilibrium Degree of Transparency and Control in Monetary Policy," NBER Working Papers 7152, National Bureau of Economic Research, Inc.
  3. Jensen, Henrik, 2001. "Optimal degrees of transparency in monetary policymaking," Discussion Paper Series 1: Economic Studies 2001,04, Deutsche Bundesbank, Research Centre.
  4. Hahn, Volker & Gersbach, Hans, 2001. "Should the Individual Voting Records of Central Bankers be Published?," Discussion Paper Series 1: Economic Studies 2001,02, Deutsche Bundesbank, Research Centre.
  5. Tarkka, Juha & Mayes, David, 1999. "The value of publishing official central bank forecasts," Research Discussion Papers 22/1999, Bank of Finland.
  6. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  7. Christina D. Romer & David H. Romer, 1996. "Federal Reserve Private Information and the Behavior of Interest Rates," NBER Working Papers 5692, National Bureau of Economic Research, Inc.
  8. Marvin Goodfriend, 1985. "Monetary mystique : secrecy and central banking," Working Paper 85-07, Federal Reserve Bank of Richmond.
  9. Charles Nolan & Eric Schaling, 1996. "Monetary Policy Uncertainty and Central Bank Accountability," Bank of England working papers 54, Bank of England.
  10. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  11. Michelle R. Garfinkel & Seonghwan Oh, 1990. "When and How Much to Talk: Credibility and Flexibility in Monetary Policy With Private Information," UCLA Economics Working Papers 593, UCLA Department of Economics.
  12. David Backus & John Driffill, 1984. "Inflation and Reputation," Working Papers 560, Queen's University, Department of Economics.
  13. Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, vol. 4(2), pages 91-102, 08.
  14. Svensson, Lars E.O. & Faust, John, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Seminar Papers 636, Stockholm University, Institute for International Economic Studies.
  15. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  16. Robert J. Barro, 1986. "Reputation in a Model of Monetary Policy with Incomplete Information," NBER Working Papers 1794, National Bureau of Economic Research, Inc.
  17. 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.
  18. Cukierman, A., 2000. "Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem," Papers 2000-4, Tel Aviv.
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