The Economic Impact of Central Bank Transparency.

Abstract

During the last decades a lot of central banks have become more transparent about their monetary policy. The research question that is addressed in this book is whether central bank transparency is desirable from an economic viewpoint. It is shown that transparency increases have been beneficial. They have resulted in better anchored inflation expectations, lower inflation persistence, better aligned inflation perceptions, more trust in the central bank, and lower nominal interest rates. However, central banks would be wise to not strive for full transparency. A large amount of public information results in confusion or too much weight on the uncertainty surrounding forecasts, resulting in more persistent inflation. In short, the answer to the research question is "yes, but only up to a certain point".