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Central Bank Transparency in Theory and Practice

Author

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  • Maria Demertzis
  • Andrew Hughes Hallet

Abstract

We study the effects of Central Bank transparency on inflation and the output gap. We thus first identify a small analytical model which concludes that transparency affects the variability of inflation and output and not their average levels. Then we examine whether this conjecture holds empirically, employing the recently derived index of transparency by Eijffinger and Geraats. The empirical findings confirm that the averages are not affected by transparency. It does seem to explain however, about 50% of the variability in inflation. The relation between transparency and output volatility is less clear but appears to be positive rather than negative.

Suggested Citation

  • Maria Demertzis & Andrew Hughes Hallet, 2003. "Central Bank Transparency in Theory and Practice," DNB Staff Reports (discontinued) 105, Netherlands Central Bank.
  • Handle: RePEc:dnb:staffs:105
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Central Bank; Economic and Political Transparency; Inflation and Output Gap performance;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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