Does Monetary Policy Transparency Matter for Banking Stability?

Wytone Jombo and Wook Sohn

Emerging Markets Finance and Trade, 2025, vol. 61, issue 11, 3261-3276

Abstract: This study examines the relationship between monetary policy transparency and banking stability based on the data of 72 countries from 2000 to 2019, using fixed effects panel regression. Overall, we find a positive relationship between monetary policy transparency and banking stability. However, this relationship is not statistically significant for emerging economies, where the first two of five subcomponent measures—political, operational, economic, procedural, and policy transparency—are negatively related or insignificant to banking stability. Therefore, to avoid unintended outcomes for banking stability, emerging economies aiming to enhance monetary policy transparency must carefully consider the type of transparency to focus on.

Date: 2025
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DOI: 10.1080/1540496X.2025.2479641

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