The effect of the market-based monetary policy transparency index on inflation and output variability

Papadamou, Stephanos; Arvanitis, Vangelis

doi:10.1080/02692171.2014.945994

Cited by 7 publications

(8 citation statements)

References 68 publications

(63 reference statements)

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“…Nonetheless, Kia (2011) argued that these types of transparency measures had limitations because of their cross-sectional forms or their availabilities only at the annual frequency. To overcome these problems, the market-based transparency index suitable for interval observations shorter than a year has been used in recent studies (Kia, 2017;Papadamou & Arvanitis, 2014). Most importantly, the market-based transparency index reflects market perceptions of monetary policy actions.…”

Section: Market-based Transparency Indexmentioning

confidence: 99%

Do monetary policy transparency and central bank communication reduce interest rate disagreement?

Seelajaroen

Budsaratragoon

Jitmaneeroj

2019

Journal of Forecasting

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Yes. This study produces evidence that monetary policy transparency and communication policy of the Bank of England have information content in reducing disagreement about interest rate forecasts. Different from most extant studies employing the transparency index derived from official documents of the central banks, this study extends the literature by using a recently developed market-based monetary transparency index. Moreover, this study analyzes forecast disagreement in a multivariate perspective based on survey data of short-and long-term rates over short and long horizons. This study characterizes several patterns on forecast disagreement related to maturities of interest rates, forecast horizons, recessions, forward guidance, credibility, transparency, and communication policy. Interestingly, disagreement among the Monetary Policy Committee in policy rate decisions is associated with lower disagreement among professional forecasters on interest rate outlook, whereas neither announcement of changes in policy rates nor publication of inflation reports affects forecast disagreement. These results have important implications for monetary policymakers in managing market expectations of interest rates.

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Section: Market-based Transparency Indexmentioning

confidence: 99%

Do monetary policy transparency and central bank communication reduce interest rate disagreement?

Seelajaroen

Budsaratragoon

Jitmaneeroj

2019

Journal of Forecasting

View full text Add to dashboard Cite

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“…1. See, for example Horváth and Vaško (2016), Papadamou et al (2014, 2015, 2017), Dai et al (2015), Demertzis and Hughes Hallet (2007, 2015), James and Lawler (2015), Papadamou and Arvanitis (2015), Dincer and Eichengreen (2014), de Mendonça and Galveas (2013), de Mendonça and Simão Filho (2008), and Geraats (2006).…”

Section: Notesmentioning

confidence: 99%

Central bank opacity and inflation uncertainty

Almeida

Corrêa

Mendonça

et al. 2017

JES

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Purpose This paper relates to the literature on central bank (CB) transparency and inflation uncertainty. Considering that opacity is a possible source for inflation uncertainty the purpose of this paper is to test the hypothesis that increase in the dispersion of the degree of CB opacity generates higher levels of inflation uncertainty. Design/methodology/approach In a first step, the authors present a theoretical model that shows how increase in the dispersion of the degree of CB opacity creates higher levels of inflation uncertainty. In a second step, the authors test the assumption that increase in the dispersion of the degree of CB opacity generates higher levels of inflation uncertainty in the Brazilian economy. Findings The findings denote that CB transparency is an important tool for guiding public expectations and thus contributes to avoiding the uncertainty caused by CB preferences. Originality/value This paper extends the theoretical model presented by de Mendonça and Simão Filho (2007) by the theoretical link between the forecast error and opacity. Furthermore, because the theoretical underpinning relies on the CB guiding inflation expectations, the authors construct an uncertainty measure based on survey of forecasts where such expectations can be inferred through the variability in the forecast error.

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“…The impact of central bank transparency on the economy has been investigated by several economists (e.g. Geraats, 2006; de Mendonça and Simão Filho, 2008; Demertzis and Hughes-Hallet, 2007, 2015; Spyromitros and Tuysuz, 2012; Neuenkirch, 2013; Dincer and Eichengreen, 2014; Papadamou et al , 2014a, b, 2015; Papadamou and Arvanitis, 2015). In general, these studies point out that transparency brings benefits to the economy, especially in relation to inflation and inflation expectations.…”

Section: Introductionmentioning

confidence: 99%

Central bank transparency, inflation targeting and monetary policy: a panel data approach

Montes

Gea

2018

JES

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Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

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The effect of the market-based monetary policy transparency index on inflation and output variability

Cited by 7 publications

References 68 publications

Do monetary policy transparency and central bank communication reduce interest rate disagreement?

Do monetary policy transparency and central bank communication reduce interest rate disagreement?

Central bank opacity and inflation uncertainty

Central bank transparency, inflation targeting and monetary policy: a panel data approach

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