Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93404
Authors: 
Geraats, Petra
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4642
Abstract: 
Many central banks have become more transparent during the last decade, in particular about macroeconomic prospects. This paper shows that such economic transparency could give central banks greater flexibility to respond to macroeconomic shocks. In particular, it allows central banks to stabilize aggregate demand and supply shocks without affecting private sector inflation expectations. In contrast, opaque central banks limit their stabilization efforts to avoid disturbing inflation expectations. As a result, they mute their interest rate response and no longer fully offset anticipated demand shocks. This leads to macroeconomic volatility that is socially detrimental.
Subjects: 
transparency
monetary policy
macroeconomic stabilization
JEL: 
E52
E58
Document Type: 
Working Paper

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