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Does transparency of central banks communication affect credit market? Empirical evidence for advanced and emerging markets

Bruno Tiberto, Claudio de Moraes (claudio.moraes@bcb.gov.br) and Paloma Pio Corrêa

The North American Journal of Economics and Finance, 2020, vol. 53, issue C

Abstract: This study examines the effect of the transparency of central banks communication on credit market. In particular, this study investigates how central banks’ effort to provide more detailed information about their objectives regarding the price stability (monetary policy transparency) and financial stability (financial stability transparency) policies are able to mitigate information asymmetry on credit market, through the net interest margin charged by the banks to engage in financial intermediation (credit spread). The findings denote central bank transparency is able to reduce the credit spread. Additionally, the evidence suggests the effect of central bank transparency on the credit spread is greater in emerging markets, where there is less information available on credit market. In brief, transparency in central banks communication is an important tool to mitigate the information asymmetry in the credit market.

Keywords: Credit market; Information asymmetric; Credit spread; Central bank transparency (search for similar items in EconPapers)
JEL-codes: E51 E52 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:53:y:2020:i:c:s1062940820301042

DOI: 10.1016/j.najef.2020.101207

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