University of Cambridge > > Darwin College Humanities and Social Sciences Seminars > Transparency of Monetary Policy in a Small Open Economy

Transparency of Monetary Policy in a Small Open Economy

Add to your list(s) Download to your calendar using vCal

If you have a question about this talk, please contact Dr Hilary Powell.

Transparency of monetary policy has recently received a great deal of attention in the economic literature. Yet there has been no analysis of the open economy case. This paper investigates the subject and provides some interesting theoretical results. In particular, I show that transparency is especially beneficial for central banks in large economies or that enjoy low credibility. Setting a target for inflation and making it public leads to smaller losses to the central bank and, in a cashless economy, higher welfare. Moreover, the model suggests that central banks that move from regimes of intermediate transparency (when communication does convey some information, although fuzzy) to a regime of higher openness (like inflation targeting) should be more successful in stabilizing both the output gap and the rate of inflation. Finally, transparency is also beneficial for exchange rate stability, particularly for central banks that lack credibility. These results are consistent with the empirical evidence that higher transparency leads to lower price and exchange rate volatility.

This talk is part of the Darwin College Humanities and Social Sciences Seminars series.

Tell a friend about this talk:

This talk is included in these lists:

Note that ex-directory lists are not shown.


© 2006-2024, University of Cambridge. Contact Us | Help and Documentation | Privacy and Publicity