Does it Pay to Be Transparent? International Evidence from Central Bank Forecasts
Bank of England Working Paper No. 143
40 Pages Posted: 11 Dec 2001
Date Written: November 2001
Is central bank transparency associated with variation in macroeconomic outcomes? Cross-country data covering 87 countries is used to construct an index for transparency based upon the detail in central banks' published forecasts. After controlling for a number of other institutional and macroeconomic variables it is found that an increase in the detail that central banks include in their published forecasts is associated with lower average inflation. The result holds regardless of whether the domestic nominal anchor is based more on an inflation or money target, but not for exchange rate targeting countries. Furthermore, no evidence is found that the publication of forecasts is associated with greater output volatility.
Keywords: transparency, monetary frameworks, inflation, central banks
JEL Classification: D72, E42, E52, E58
Suggested Citation: Suggested Citation