Does it pay to be transparent? International evidence from central bank forecasts

Quarterly Bulletin 2001 Q4
Published on 01 December 2001

By Georgios Chortareas, David Stasavage and Gabriel Sterne

Is central bank transparency associated with lower inflation? This paper provides the first international evidence on if and how the degree of transparency in monetary policy affects policy outcomes. We focus on one particular form of transparency, namely the publication of inflation forecasts and forward-looking analysis. The recent theoretical literature suggests that transparency in publishing forecasts will reduce inflation to the extent that it makes central bank credibility more sensitive to policy actions. Recent policy debates have also highlighted the potential importance of the publication of the central bank’s inflation forecasts.

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