Glenn D. Rudebusch and John C. Williams
- Published in print:
- 2008
- Published Online:
- February 2013
- ISBN:
- 9780226092119
- eISBN:
- 9780226092126
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226092126.003.0007
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter examines the unresolved debate among central bankers and researchers about the value of the direct signaling of policy intentions. The chapter is organized as follows. Section 6.2 ...
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This chapter examines the unresolved debate among central bankers and researchers about the value of the direct signaling of policy intentions. The chapter is organized as follows. Section 6.2 describes the real-world direct signaling of policy inclinations by central banks and outlines some of the arguments for and against such transparency. Sections 6.3 and 6.4 examine the macroeconomic effects of direct revelation of a central bank's expectations about the future path of the policy rate in a small theoretical model, in which private agents have imperfect information about the determination of monetary policy. In particular, it focuses on the desirability of central bank transparency about the expected path of policy when the public is uncertain about the central bank's preferences and, therefore, the future path of policy. It is shown that publication of interest rate projections better aligns the expectations of the public and the central bank. Under reasonable conditions, improving the alignment of expectations helps the central bank better meet its goals, providing support for full central bank transparency.Less
This chapter examines the unresolved debate among central bankers and researchers about the value of the direct signaling of policy intentions. The chapter is organized as follows. Section 6.2 describes the real-world direct signaling of policy inclinations by central banks and outlines some of the arguments for and against such transparency. Sections 6.3 and 6.4 examine the macroeconomic effects of direct revelation of a central bank's expectations about the future path of the policy rate in a small theoretical model, in which private agents have imperfect information about the determination of monetary policy. In particular, it focuses on the desirability of central bank transparency about the expected path of policy when the public is uncertain about the central bank's preferences and, therefore, the future path of policy. It is shown that publication of interest rate projections better aligns the expectations of the public and the central bank. Under reasonable conditions, improving the alignment of expectations helps the central bank better meet its goals, providing support for full central bank transparency.
Juan Antonio Morales and Paul Reding
- Published in print:
- 2021
- Published Online:
- August 2021
- ISBN:
- 9780198854715
- eISBN:
- 9780191888915
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198854715.003.0004
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter focuses on two key aspects of the monetary policy process: the trade-offs between the three goals that fall into the purview of central banks, price stability, output stabilization, and ...
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This chapter focuses on two key aspects of the monetary policy process: the trade-offs between the three goals that fall into the purview of central banks, price stability, output stabilization, and financial stability; and the role of central bank independence and transparency in enhancing the credibility and the efficacy of monetary policy. The chapter presents the theoretical background for each issue and discusses related empirical studies. The emphasis is on how the specific features of LFDCs impact the nature of the policy trade-offs, like informality in the labour market for the Phillips curve and the inflation–output trade-off, or the unsophisticated financial markets for financial stability concerns. In the discussion on central bank independence and transparency, the situation in LFDCs is compared with that in advanced and emerging market countries.Less
This chapter focuses on two key aspects of the monetary policy process: the trade-offs between the three goals that fall into the purview of central banks, price stability, output stabilization, and financial stability; and the role of central bank independence and transparency in enhancing the credibility and the efficacy of monetary policy. The chapter presents the theoretical background for each issue and discusses related empirical studies. The emphasis is on how the specific features of LFDCs impact the nature of the policy trade-offs, like informality in the labour market for the Phillips curve and the inflation–output trade-off, or the unsophisticated financial markets for financial stability concerns. In the discussion on central bank independence and transparency, the situation in LFDCs is compared with that in advanced and emerging market countries.
