IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Transparency: can central banks commit to truthful communication?

  • Julian A. Parra-Polania


To evaluate whether transparency is beneficial, it is usual to assume that the central bank may choose one of two options, opacity versus truthful communication. However, the monetary policymaker may have incentives to misrepresent private information so as to reduce economic volatility by manipulating inflation expectations. Using a standard model, this paper points out the fact that if misrepresentation is included as a possible action there is no rational expectations equilibrium with inflation announcements. Therefore, even if transparency is preferred over secrecy the central bank cannot credibly commit to truth-telling, in contrast to what is commonly assumed in the literature on transparency

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.

File URL:
Download Restriction: no

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 009614.

in new window

Length: 26
Date of creation: 28 May 2012
Date of revision:
Handle: RePEc:col:000094:009614
Contact details of provider:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Geraats, P.M., 2004. "Transparency and Reputation: The Publication of Central Bank Forecasts," Cambridge Working Papers in Economics 0473, Faculty of Economics, University of Cambridge.
  2. Hoerova, Marie & Monnet, Cyril & Temzelides, Ted, 2012. "Money talks," Economics Letters, Elsevier, vol. 116(3), pages 617-621.
  3. M. Demertzis & A. Hughes Hallet, 2002. "Central Bank Transparency in Theory and Practice," WO Research Memoranda (discontinued) 704, Netherlands Central Bank, Research Department.
  4. 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.
  5. Petra M. Geraats, 2007. "The Mystique of Central Bank Speak," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 37-80, March.
  6. Tarkka, Juha & Mayes, David, 1999. "The Value of Publishing Official Central Bank Forecasts," Research Discussion Papers 22/1999, Bank of Finland.
  7. Sebástian Gómez Barrero & Julián A.Parra Polanía, . "Comportamiento estratégico de los bancos centrales al anunciar pronósticos de inflación," Borradores de Economia 653, Banco de la Republica de Colombia.
  8. Jensen, Henrik, 2002. " Optimal Degrees of Transparency in Monetary Policymaking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 399-422, September.
  9. Matthew B. Canzoneri, 1983. "Monetary policy games and the role of private information," International Finance Discussion Papers 249, Board of Governors of the Federal Reserve System (U.S.).
  10. Petra M. Geraats, 2001. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Macroeconomics 0012011, EconWPA.
  11. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  12. Daniel Laskar, 2010. "Central Bank Transparency and Shocks," Post-Print halshs-00560261, HAL.
  13. Garfinkel, Michelle R. & Oh, Seonghwan, 1995. "When and how much to talk credibility and flexibility in monetary policy with private information," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 341-357, April.
  14. Nergiz Dincer & Barry Eichengreen, 2009. "Central Bank Transparency: Causes, Consequences and Updates," NBER Working Papers 14791, National Bureau of Economic Research, Inc.
  15. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March.
  16. Eijffinger, S.C.W. & Tesfaselassie, M.F., 2007. "Central bank forecasts and disclosure policy : Why it pays to be optimisitic," Other publications TiSEM 22defe88-78bb-439d-9a38-8, Tilburg University, School of Economics and Management.
  17. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
  18. Carl E. Walsh, 2007. "Optimal Economic Transparency," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 5-36, March.
  19. Giacomo Carboni & Martin Ellison, 2010. "Inflation and output volatility under asymmetric incomplete information," Post-Print hal-00753043, HAL.
  20. Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, vol. 4(2), pages 91-102, 08.
  21. 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.
  22. Mahadeva, Lavan & Gabriel Sterne, 2002. "Inflation Targets as a Stabilisation Device," Royal Economic Society Annual Conference 2002 134, Royal Economic Society.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:col:000094:009614. 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: (Clorith Angélica Bahos Olivera)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.