Monetary Policy Transparency and Inflation Persistence in a Small Open Economy

40 Pages Posted: 12 Dec 2008 Last revised: 19 Dec 2008

See all articles by Meixing Dai

Meixing Dai

University of Strasbourg - Bureau of Economic Theory and Application (BETA)

Moïse Sidiropoulos

University of Strasbourg - Bureau of Economic Theory and Application (BETA)

Eleftherios Spyromitros

University of Angers - Bureau of Economic Theory and Application (BETA)

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

Dai, Meixing and Sidiropoulos, Moïse and Spyromitros, Eleftherios, Monetary Policy Transparency and Inflation Persistence in a Small Open Economy (November 21, 2008). Available at SSRN: https://ssrn.com/abstract=1305162 or http://dx.doi.org/10.2139/ssrn.1305162

Meixing Dai

University of Strasbourg - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France

Moïse Sidiropoulos

University of Strasbourg - Bureau of Economic Theory and Application (BETA) ( email )

France

Eleftherios Spyromitros (Contact Author)

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France

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