Central Bank Transparency: Where, Why, and with What Effects?
Greater transparency in central bank operations is the most dramatic change in the conduct of monetary policy in recent years. In this paper we present new information on its extent and effects. We show that the trend is general: a large number of central banks have moved in the direction of greater transparency since the late 1990s. We then analyze the determinants and effects of central bank transparency in an integrated empirical framework. Transparency is greater in countries with more stable and developed political systems and deeper and more developed financial markets. Our preliminary analysis suggests broadly favorable if relatively weak impacts on inflation and output variability.
State Planning Organization, Ankara, and University of California, Berkeley, respectively. An earlier version was presented to the conference on central banking hosted by the Cournot Center, Paris, 30 November-1 December 2006. We thank Petra Geraats, Pierre Siklos and conference participants for helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.