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

Working Paper no. 143
By Georgios Chortareas, David Stasavage and Gabriel Sterne

Is central bank transparency associated with variation in macroeconomic outcomes? We use cross-country data covering 87 countries and construct an index for transparency based upon the detail in central banks’ published forecasts. After controlling for a number of other institutional and macroeconomic variables we find that an increase in the detail that central banks include in their published forecasts is associated with lower average inflation. The result holds regardless of whether the domestic nominal anchor is based more on an inflation or money target, but not for exchange rate targeting countries. Furthermore, we do not find evidence that the publication of forecasts is associated with greater output volatility. 

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