Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153580
Authors: 
Ehrmann, Michael
Eijffinger, Sylvester
Fratzscher, Marcel
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1146
Abstract: 
There is a broad consensus in the literature that costs of information processing and acquisition may generate costly disagreements in expectations among economic agents, and that central banks may play a central role in reducing such dispersion in expectations. This paper analyses empirically whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables, using a large set of proxies for central bank transparency in 12 advanced economies. It finds evidence for a significant and sizeable effect of central bank transparency on forecast dispersion, be it by means of announcing a quantified inflation objective, other forms of communication, or by publishing central banks’ inflation and output forecasts. However, there also appear to be limits to central bank transparency, with decreasing marginal returns to enhancing (economic) transparency, and given our findings that disagreement among inflation expectations in the general public is not affected by the various central bank transparency measures analyzed in this paper.
Subjects: 
central bank communication
central banking
disagreement
forecasting
inflation targeting
monetary policy
survey expectations
transparency
JEL: 
E37
E52
C53
Document Type: 
Working Paper

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