Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192931 
Year of Publication: 
2018
Series/Report no.: 
KOF Working Papers No. 445
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
Abstract: 
Using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation, primarily by reducing uncertainty that is common to agents rather than disagreement between agents. This suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency. The adoption of inflation targets and forward guidance are both associated with lower uncertainty, although inflation targets have a stronger impact on reducing uncertainty than forward guidance. Moreover, there are diminishing benefits from ever higher levels of transparency. Taken as a whole, our results support the contention that clarity of communication is as important as the magnitude of transparency.
Subjects: 
Central bank transparency
Uncertainty
Disagreement
Monetary policy
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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