Static and Dynamic Effects of Central Bank Transparency

Meixing Dai ()

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

Abstract: 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.

Keywords: Central bank transparency (opacity); macroeconomic volatility; inflation expectations dynamics; speed of convergence to the equilibrium. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://beta.u-strasbg.fr/WP/2012/2012-08.pdf (application/pdf)

Related works:
Journal Article: STATIC AND DYNAMIC EFFECTS OF CENTRAL BANK TRANSPARENCY (2016)
Working Paper: Static and Dynamic Effects of Central Bank Transparency (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2012-08

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