Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem

Alex Cukierman

No 275640, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: This paper surveys and evaluates alternative views regarding the desirable combination of accountability, credibility and transparency in the newly created ECB, including recent controversies regarding publication of minutes, Council member votes and ECB forecasts. The paper shows that premature publication of central bank forecasts reduces the ability of the bank to engage in stabilization policy while maintaining inflation reasonably close to its inflation objective. This is demonstrated for an economy in which the transmission mechanism is characterized by a conventional, expectations' augmented Phillips relation. When the transmission mechanism operates via a Keynesian real interest rate channel (of the type used in a number of econometric models, and compactly summarized in Svensson (1997a)) premature publication of forecasts does not affect expected social welfare provided only price stability and stabilization policy matter. But when (due, possibly, to detrimental effects of interest rate variability on financial stability) social welfare is also negatively related to interest rate variability, premature publication of forecasts, again, reduces expected social welfare.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 56
Date: 2000-01
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Citations: View citations in EconPapers (13)

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Working Paper: Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275640

DOI: 10.22004/ag.econ.275640

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