Transparency and Credibility: Monetary Policy with Unobservable Goals

Faust, Jon; Svensson, Lars E. O.

doi:10.3386/w6452

Cited by 174 publications

(228 citation statements)

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“…Transparency about such shocks gives rise to a beneficial incentive effect as it makes policy outcomes a better signal of the intentions of the central bank, which again leads to a reputation effect that reduces the inflation bias (Faust and Svensson 2001).…”

Section: Economic Conditionsmentioning

confidence: 99%

“…Stated differently, transparency induces the central bank to build and maintain a reputation for low inflation (e.g. Faust andSvensson 2001, Geraats 2005b).…”

Section: Theoretical Insightsmentioning

confidence: 99%

“…Direct observability of the central bank's goals could be highly damaging because it makes the public less sensitive to monetary policy actions and outcomes, which makes it more tempting for the central bank to pursue expansionary policy that leads to an inflation bias (Faust andSvensson 2001, Geraats 2005b).…”

Section: Institutions and Objectivesmentioning

confidence: 99%

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Transparency of Monetary Policy: Theory and Practice

Geraats¹

2006

CESifo Economic Studies

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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. Transparency has become one of the main features of monetary policymaking during the last decade. This paper establishes some stylized facts. In addition, it provides a systematic overview of the practice of monetary policy transparency around the world. It shows much diversity in information disclosure, even for central banks with the same monetary policy framework, including inflation targeting. Nevertheless, the paper finds significant differences in transparency across monetary policy frameworks. The empirical findings are explained using key insights distilled from the theoretical literature. Thus, this paper aims to bridge the gap between the theory and practice of monetary policy transparency. Terms of use: Documents in EconStor mayJEL Code: E58, D82.

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Section: Economic Conditionsmentioning

confidence: 99%

“…Stated differently, transparency induces the central bank to build and maintain a reputation for low inflation (e.g. Faust andSvensson 2001, Geraats 2005b).…”

Section: Theoretical Insightsmentioning

confidence: 99%

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Transparency of Monetary Policy: Theory and Practice

Geraats¹

2006

CESifo Economic Studies

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“…Two measures based on inflation expectations suggested in the theoretical literature have been calculated: the deviations of inflation expectations from the inflation target (e.g. Faust -Svensson 2001), and the weight of the inflation target in the formation of inflation expectations (e.g. Bomfim -Rudebusch 2000).…”

Section: Comparison With Other Measures Of Central Bank Credibilitymentioning

confidence: 99%

Central Bank Credibility: Determinants and Measurement. A Cross-Country Study

Mackiewicz-Łyziak

2016

Acta Oeconomica

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J. MACKIEWICZ-ŁYZIAKThis paper proposes a new measure of central bank credibility -the credibility index calculated on the basis of the key determinants of central bank credibility. The index is compiled for 9 countries: the Czech Republic, Hungary, Slovakia, Poland, Chile, Brazil, Turkey, United Kingdom and Sweden , for the years 1999-2007. The results are cross-checked with other credibility measures based on infl ation expectations of two groups of economic agents. The analysis demonstrates that the credibility index may be considered a relevant and consistent credibility measure.

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“…Furthermore, there are recent results by Gauthier (2003) and Desgranges and Gauthier (2003) showing, among other things, that the same result holds in univariate perfect foresight models with additional 1 See Blanchard and Kahn (1980), Binder and Pesaran (1995), King and Watson (1998), among others. 2 For example, Barro (1989) and Faust and Svensson (2001). 3 It is important to note that the term "minimum state variable" is here being used in the manner of McCallum (1983McCallum ( , 1999 or Evans (1986), rather than that of Evans and Honkapohja (2001) or Gauthier (2003), which permits more than one MSV solution.…”

Section: Introductionmentioning

confidence: 99%