EconPapers    
Economics at your fingertips  
 

Imperfect Transparency and Shifts in the Central Bank's Output Gap Target

Niklas Westelius ()

No 415, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

Abstract: In the New Keynesian framework, the public's expectation about the future path of monetary policy is an important determinant of current economic conditions. This paper examines the impact of unobservable shifts in the central bank's output gap target on inflation and output dynamics. I show that when the degree of persistence of a shock is private information of the central bank, and policy is discretionary in nature, it is optimal for the central bank not to reveal the future expected path of the output gap target. Perfect transparency unambiguously increases inflation and output volatility and thus lowers welfare.

Keywords: Transparency; Monetary Policy; Discretion; Commitment (search for similar items in EconPapers)
JEL-codes: E5 E52 E61 (search for similar items in EconPapers)
Date: 2006, Revised 2008
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://econ.hunter.cuny.edu/wp-content/uploads/sit ... /HunterEconWP415.pdf (application/pdf)

Related works:
Journal Article: Imperfect transparency and shifts in the central bank's output gap target (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:415

Access Statistics for this paper

More papers in Economics Working Paper Archive at Hunter College from Hunter College Department of Economics 695 Park Avenue, New York, NY 10065. Contact information at EDIRC.
Bibliographic data for series maintained by Jonathan Conning ().

 
Page updated 2020-09-18
Handle: RePEc:htr:hcecon:415