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The Effect of Central Bank Transparency on Exchange Rate Volatility

Christoph Weber

No 174, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: The increase in central bank transparency was one of the main developments in central banking in the last two decades. This leads to the question of which effect central bank transparency has on the volatility of exchange rates. According to theoretical considerations, more information could either lead to more precise forecasts or to more noise trading. This raises the need for an empirical estimation of the relationship. The study shows that the effect of central bank transparency on exchange rate volatility depends on the development of countries. While there is no effect of central bank transparency in the composite sample and for developing countries, transparency increases exchange rate fluctuations in developed countries.

Keywords: Central Bank Transparency; Exchange Rate Volatility; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E24 E58 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-09
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