Monetary policy transparency and inflation persistence in a small open economy

Meixing Dai (), Moise Sidiropoulos and Eleftherios Spyromitros

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: Using a New Keynesian small open economy model, we examine the effects of central bank transparency on inflation persistence. We have found that more opacity could reinforce the effect of persistent shocks on the level and variability of endogenous variables if the difference between the interest elasticity of domestic goods demand and the degree of trade openness is sufficiently large or sufficiently low, judging on structural parameters characterising the economy, the central bank preference and its initial degree of opacity. Our result implies that, under perfect capital mobility, a high degree of domestic financial development is a good reason for increasing transparency.

Keywords: Central bank’s transparency; open economy; inflation persistence. (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Working Paper: Monetary policy transparency and inflation persistence in a small open economy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2009-08

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