Transparency, Flexibility and Macroeconomic Stabilization

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4642

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Central Banks and Their Policies
• Subject: transparency ; monetary policy ; macroeconomic stabilization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Geraats, Petra
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/93404
• Last update: 10.03.2025, 11:43 AM CET