Trends in Monetary Policy Transparency^*

Abstract

Transparency has become a prominent feature of monetary policy. This paper provides an overview of central bank communication practices and is the first to systematically analyze transparency trends throughout the world and across monetary policy frameworks. It shows that increases in information disclosure have not been confined to inflation targeting but extend to other monetary policy frameworks, although there are significant differences. In addition, countries with higher inflation and economic development have undergone larger increases in transparency. Moreover, it shows that greater transparency has been followed by lower average inflation.JEL Code: E42, E58.

How transparent about its inflation target should a central bank be?

“…As a conclusion, we confirm the result of Demertzis and Viegi (2009): the publicity of the target is superfluous in a weakly volatile environment. This result is in line with what has been observed during the Great Moderation period, where developed countries, either under IT and non-IT, have experienced a low macroeconomic variability (Geraats 2009). The performance of IT in these countries appear, thus, at the most, "non-negative" (Walsh 2009).…”

“…A useful reference is Walsh (2009). On the impact of transparency and communication of the CB, see, among others, Geraats (2002Geraats ( , 2009) and Woodford (2005). Empirical evidence on the effects of IT on expectations has been provided by Johnson (2002Johnson ( , 2003.…”

Central banks' voting records, the financial crisis and future monetary policy

“…An enormous increase in central bank transparency over the last two decades has attracted extensive research efforts aimed at uncovering the implications of increased transparency (Blinder et al, 2009, Geraats, 2009. While theoretical research has mainly focused on the welfare effects of increased transparency (Morris and Shin, 2002, Angeletos and Pavan, 2007, Cornand and Heinemann, 2008, Dale et al, 2011, Hahn, 2012, empirical research has examined the implications of increased transparency with respect to monetary policy predictability (Gerlach-Kristen, 2004, Crowe, 2010, Sturm and de Haan, 2011, Horvath et al, 2012a, macroeconomic outcomes (Dincer and Eichengreen, 2014) and dissent among central bankers (Meade and Stasavage, 2008).…”

Economic Mechanism of Inflation Targeting in Developing Countries

“…Transparency and strategy of efficient communication are of crucial importance for formation of the population's expectations about inflation. Since the early 1990s, all central banks have become more transparent, as openness has replaced mystique as a guide to monetary policy, but inflation targeters are the most transparent (Geraats, 2009). Dincer and Eichengreenand in their scientific research of 2007 proved that the most transparent are the Reserve Bank of New Zealand, the Swedish Riksbank, the Bank of England, the Czech National Bank, Bank of Canada, European Central Bank.…”