Central Bank Transparency and Disagreement in Inflation Expectations

Shunichi Yoneyama
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Shunichi Yoneyama: Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: shunichi.yoneyama@boj.or.jp)

No 21-E-12, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: This paper measures the transparency of the Federal Reserve Board (FRB) regarding its target inflation rate before its adoption of inflation targeting using data on the disagreement in inflation expectations among U.S. consumers. We construct a model of inflation forecasters employing the frameworks of both an unobserved components model and a noisy information model. We estimate the model and extract the transparency of the FRB regarding the target as the standard deviation of the heterogeneous noise in the inflation trend signal, where the trend proxies the FRB's inflation target. The results show a great improvement in transparency after the mid-1990s as well as its significant contribution to the decline in the disagreement in long- horizon inflation expectations.

Keywords: Central bank transparency; forecast disagreement; inflation dynamics; imperfect information (search for similar items in EconPapers)
JEL-codes: D83 E37 E50 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:21-e-12

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