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The Implications of Central Bank Transparency for Uncertainty and Disagreement

Jitmaneero, Boonlert and Lamla, Michael J and Wood, Andrew (2019) 'The Implications of Central Bank Transparency for Uncertainty and Disagreement.' Journal of International Money and Finance, 90. 222 - 240. ISSN 0261-5606

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Abstract

Using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation, primarily by reducing uncertainty that is common to agents rather than disagreement between agents. This suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency. The adoption of inflation targets and forward guidance are both associated with lower uncertainty, although inflation targets have a stronger impact on reducing uncertainty than forward guidance. Moreover, there are diminishing benefits from ever higher levels of transparency. Taken as a whole, our results support the contention that clarity of communication is as important as the magnitude of transparency.

Item Type: Article
Uncontrolled Keywords: Central bank transparency; Uncertainty; Disagreement; Monetary policy
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 17 Oct 2018 10:31
Last Modified: 29 Oct 2018 16:15
URI: http://repository.essex.ac.uk/id/eprint/23294

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