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Monetary Policy Delegation and Transparency of Policy Targets: A Positive Analysis

Kai Hielscher ()
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Kai Hielscher: Helmut Schmidt University, Hamburg

No 113/2011, Working Paper from Helmut Schmidt University, Hamburg

Abstract: We show that, in a two-stage model of monetary policy with stochastic policy targets and asymmetric information, the transparency regime chosen by the central bank does never coincide with the regime preferred by society. Independent of society’s endogenous choice of delegation, the central bank reveals its inflation target and conceals its output target. In contrast, society would prefer either transparency or opacity of both targets. As a conclusion, the choice of the transparency regime should be part of the optimal delegation solution.

Keywords: central banking; monetary policy; communication; delegation; positive analysis (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2011-06-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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