Optimal Degrees of Transparency in Monetary Policymaking

Henrik Jensen

No 2689, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: According to most academics and policymakers, transparency in monetary policymaking is desirable. I examine this proposition in a small theoretical model emphasizing forward-looking private sector behaviour. Transparency makes it easier for price setters to infer the central bank's future policy intentions, thereby making current inflation more responsive to policy actions. This induces the central bank to pay more attention to inflation rather than output gap stabilization. Then, transparency may be disadvantageous. It may actually be a policy-distorting straitjacket if the central bank enjoys low-inflation credibility, and there is need for active monetary stabilization policy.

Keywords: transparency; Monetary policy; Central bank institutions (search for similar items in EconPapers)
JEL-codes: E42 E52 (search for similar items in EconPapers)
Date: 2001-02
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Optimal Degrees of Transparency in Monetary Policymaking (2002)
Working Paper: Optimal degrees of transparency in monetary policymaking (2001)
Working Paper: Optimal Degrees of Tranaparency in Monetary Policymaking
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