Central Bank Transparency and Financial Market Expectations: The Case of Emerging Markets

Matthias Neuenkirch

No 201136, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In this paper, we study how central bank transparency influences the formation of money market expectations in emerging markets. The sample covers 25 countries for the period from January 1998 to December 2009. We find, first, that transparency reduces the bias (the difference between the money market rate and the weighted expected target rate over the contract period) in money market expectations. The effect is larger for countries with no exchange rate peg and countries with low income. Second, an intermediate level of transparency is found to have the most favorable influence on money market expectations: neither complete secrecy nor complete transparency is optimal. Finally, all subcategories of the Eijffinger and Geraats (2006) index lead to a smaller bias in expectations, with political transparency having the largest effect.

Keywords: Central Bank Transparency; Emerging Markets; Financial Market Expectations; Interest Rates; Monetary Policy; Money Market (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-mon
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https://www.uni-marburg.de/en/fb02/research-groups ... -2011_neuenkirch.pdf Second version, 2011 (application/pdf)

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Journal Article: Central bank transparency and financial market expectations: The case of emerging markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201136

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