Monetary Policy Transparency and Financial Market Dynamics

La transparence de la politique monétaire et la dynamique des marchés financiers

Meixing Dai (), Moïse Sidiropoulos () and Eleftherios Spyromitros
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Moïse Sidiropoulos: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper studies the implications, in terms of macroeconomic stability, of the relation between the degree of independence of the central bank and the degree of monetary policy transparency (opacity), in a model which takes account explicitly of stock market and therefore the joint dynamics of inflation and asset prices. We show that the lack of transparency on the preferences of the central bank exerts a negative influence on macroeconomic stability. This negative influence could be offset by the effects of a perceived relative weight (by the public) higher than that actually assigned by the central bank to the output objective. In addition, an economy characterized by a less flexible labor market, a demand for goods which is not very sensitive to the real interest rate, a high velocity of money and a high interest-elasticity of money demand require greater transparency to ensure economic stability.

Keywords: Transparence; Règle de taux d’intérêt; Prix des actifs; Stabilité macro-économique (search for similar items in EconPapers)
Date: 2007
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Published in Économie appliquée : archives de l'Institut de science économique appliquée, 2007, 4

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00279415

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