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Static and Dynamic Effects of Central Bank Transparency

  • Meixing Dai

Using a New Keynesian framework, this paper shows that, under optimal discretion and optimal pre-commitment in a timeless perspective, imperfect transparency about the relative weight that the central bank assigns to output-gap stabilization generally reduces the average reaction of inflation to inflation shocks and the volatility of inflation, but increases these of the output gap in static and dynamic terms, and more so when inflation shocks are highly persistent. On balance, when inflation shocks are not excessively persistent, opacity could improve social welfare, more likely under pre-commitment than under discretion, if the weight assigned to output-gap stabilization is low.

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File URL: http://www.beta-umr7522.fr/productions/publications/2012/2012-08.pdf
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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2012-08.

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Date of creation: 2012
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Handle: RePEc:ulp:sbbeta:2012-08
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  1. Eijffinger, Sylvester C W & Tesfaselassie, Mewael F., 2005. "Central Bank Forecasts and Disclosure Policy: Why it Pays to be Optimistic," CEPR Discussion Papers 4854, C.E.P.R. Discussion Papers.
  2. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. DEMERTZIS Maria & HUGHES HALLETT Andrew, . "Central Bank Transparency in Theory and Practice," EcoMod2003 330700041, EcoMod.
  4. Westelius, Niklas J., 2009. "Imperfect transparency and shifts in the central bank's output gap target," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 985-996, April.
  5. van der Cruijsen, Carin A.B. & Eijffinger, Sylvester C.W. & Hoogduin, Lex H., 2010. "Optimal central bank transparency," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1482-1507, December.
  6. Giuseppe Ciccarone & Enrico Marchetti, 2008. "Revisiting the role of multiplicative uncertainty in a model without inflationary bias," Working Papers 110, University of Rome La Sapienza, Department of Public Economics.
  7. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  8. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," NBER Working Papers 13932, National Bureau of Economic Research, Inc.
  9. Christopher W. Crowe & Ellen E. Meade, 2008. "Central Bank Independence and Transparency; Evolution and Effectiveness," IMF Working Papers 08/119, International Monetary Fund.
  10. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, June.
  11. Giuseppe Ciccarone & Giovanni Di Bartolomeo & Enrico Marchetti, 2005. "Unions, fiscal policy and central bank transparency," Macroeconomics 0508004, EconWPA.
  12. Olivier Cardi & Romain Restout, 2012. "Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy," Working Papers of BETA 2012-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  13. Claudia Curi & Cinzia Daraio & Patrick Llerena, 2012. "University Technology Transfer: How (in-)efficient are French universities?," Working Papers of BETA 2012-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  14. Eleftherios Spyromitros & Blandine Zimmer, 2007. "Monetary accommodation and unemployment: Why central bank transparency matters," Working Papers of BETA 2007-27, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  15. repec:ner:tilbur:urn:nbn:nl:ui:12-143036 is not listed on IDEAS
  16. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
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