Why Adopt Transparency? The Publication of Central Bank Forecasts

41 Pages Posted: 12 Dec 2002

See all articles by Petra M. Geraats

Petra M. Geraats

University of Cambridge - Faculty of Economics and Politics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2001

Abstract

Recently, several central banks have abandoned the usual secrecy in monetary policy and become very transparent. This paper provides an explanation for this puzzling fact, focussing on the disclosure of central bank forecasts. It shows that transparency reduces the inflationary bias and gives the central bank greater flexibility to respond to shocks in the economy. Furthermore, it makes it easier for a central bank to build reputation. To achieve these benefits of transparency it is generally necessary to publish the conditional central bank forecasts for both inflation and output.

Keywords: Transparency, monetary policy

JEL Classification: E52, E58

Suggested Citation

Geraats, Petra, Why Adopt Transparency? The Publication of Central Bank Forecasts (January 2001). Available at SSRN: https://ssrn.com/abstract=356002

Petra Geraats (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 335 295 (Phone)
+44 1223 335 475 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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