The relationship between central bank transparency and the quality of inflation forecasts: is it U-shaped?

Emna Trabelsi

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: A recent theoretical literature highlighted the potential dangers of further increasing information disclosure by central banks. This paper gives a continuous empirical investigation of the existence of an optimal degree of transparency in the lines of van der Cruijsen et al. We test a quadratic relationship between central bank transparency and the inflation persistence by introducing some technical and economic modifications. Particularly, we used three new measures of transparency. An appropriate U shape test that was made through a Stata routine, recently developed by Lind and Mehlum, indicates a robust optimal intermediate degree of transparency, but its level is not. These results were obtained using a panel of 11 OECD central banks under the period 1999-2009. The estimations were run using a bias corrected LSDVC, a newly recent technique developed by Bruno for short dynamic panels with fixed effects, extended to accommodate unbalanced data.

Keywords: Intermediate optimal transparency degree; inflation forecasts; inflation persistence; u-shaped relationship; non linear modeling; LSDVC; Principal Component Analysis. (search for similar items in EconPapers)
JEL-codes: C23 E58 (search for similar items in EconPapers)
Date: 2012-01-02
New Economics Papers: this item is included in nep-cba, nep-for and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.eeri.eu/documents/wp/EERI_RP_2012_02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2012_02

Access Statistics for this paper

More papers in EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels Contact information at EDIRC.
Bibliographic data for series maintained by Julia van Hove ().