Central bank transparency and inflation (volatility) – new evidence

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract:The last decades have shown a tendency towards higher central bank transparency. It became customary for central bankers to explain their monetary policy decisions in detail and for them to publish inflation forecasts. This leads to the question of how central bank transparency is entangled with price stability and inflation volatility. A plethora of studies analysed the relationship from a theoretical point of view and came to contradictory results. Whilst some studies argued that transparency leads to lower inflation, others concluded that openness of central banks results in higher prices. Conversely, there is only a small amount of studies looking at this issue empirically. Most studies found a diminishing effect of transparency on inflation. However, these studies hardly controlled for other causes of inflation. This paper tries to close this gap by employing a panel data set on central bank transparency. We find that transparency significantly reduces inflation rates even if we control for other determinants of inflation. This result still holds under various robustness checks. The same is true for inflation volatility: central bank transparency seems to diminish inflation uncertainty. This confirms the economic importance of central bank transparency.JEL: E31, E42, E58

Inflation targeting & implications of oil shocks for inflation expectations in oil-importing and exporting economies: Evidence from three Nordic Kingdoms

“…The transparency of central banking which is one of the claimed benefits of inflation targeting may contribute to anchoring inflation expectations. While acknowledging this notion, Weber (2018) argued that the effect on inflation mainly comes from reduced inflation expectations. Among the earlier proponents of the role of expectations, Friedman (1968); Phelps (1967) attributed to the role of expectations in determining inflation.…”

Formal financial institutions financing of immigrant small and medium enterprises in South Africa

“…This finding is consistent with that of Stiglitz and Weiss (1981) who developed the theoretical contributions on credit rationing, given that FFIs always want to mitigate the risk of granting credit to immigrant SMEs. Another research study by Weber (2018) acknowledged that FFIs are not interested in lending to certain businesses because of the high-risk profile of the business and its owners.…”

Guidelines and criteria used by formal financial institutions to assess credit applications from small and medium enterprises in South Africa

“…As a result, only 25% of SMEs have access to credit because of the high risk in the SME sector, as is evident from GEM (Daniels et al 2017). Another research by Weber (2018) points out that FFIs are not interested in lending to particular businesses because of the high-risk profile of the business and its owners.…”