Monetary Policy Transparency and Inflation Persistence in a Small Open Economy
40 Pages Posted: 12 Dec 2008 Last revised: 19 Dec 2008
Date Written: November 21, 2008
Abstract
Using a New-Keynesian small open economy model, we examine the effects of central bank transparency on inflation persistence. We have found that more opacity could reinforce the effect of persistent shocks on the level and variability of endogenous variables if the difference between the interest elasticity of domestic goods demand and the degree of trade openness is sufficient large or sufficiently low, judging on structural parameters characterising the economy, the central bank preference and its initial degree of opacity. Our result implies that, under perfect capital mobility, a high degree of domestic financial development is a good reason for increasing the transparency.
Keywords: Central bank transparency, inflation persistence, open economy
JEL Classification: E52, E58, F41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Transparency and Credibility: Monetary Policy with Unobservable Goals
By Jon Faust and Lars E. O. Svensson
-
Social Value of Public Information: Morris and Shin (2002) is Actually Pro Transparency, Not Con
-
Transparency of Information and Coordination in Economies with Investment Complementarities
-
Transparency of Information and Coordination in Economies with Investment Complementarities
-
Efficient Use of Information and Social Value of Information