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Does Greater Transparency Stabilize Output? Evidence from Panel Data

Author

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  • Ummad Mazhar

    (Beaconhouse National University, Lahore.)

Abstract

While transparency is following a non-decreasing trend across countries, the theoretical predictions concerning transparency and output volatility are mixed. We investigate the link between monetary policy transparency and output volatility in a panel data set of 80 countries from 1998-2007. Controlling the influence of other structural variables, we find a significant impact of transparency on output stability. Two novel aspects of our analysis are that (a) the effect of transparency on output volatility is independent of its effect on inflation; (b) its effect on output volatility is independent of its correlation with central bank independence. Our findings are robust against different measures of transparency, different samples, and different measures of output volatility.

Suggested Citation

  • Ummad Mazhar, 2013. "Does Greater Transparency Stabilize Output? Evidence from Panel Data," SBP Working Paper Series 59, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:59
    as

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    File URL: http://www.sbp.org.pk/publications/wpapers/2013/wp59.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Transparency; great moderation; inventory changes; instrumental variables; endogeneity; Arellano-Bond estimator; 3SLS; panel data;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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