Working Paper: NBER ID: w14791
Authors: Nergiz Dincer; Barry Eichengreen
Abstract: We present updated estimates of central bank for 100 countries up through 2006 and use them to analyze both the determinants and consequences of monetary policy transparency in an integrated econometric framework. We establish that there has been significant movement in the direction of greater central bank transparency in recent years. Transparent monetary policy arrangements are more likely in countries with strong and stable political institutions. They are more likely in democracies, with their culture of transparency. Using these political determinants as instruments for transparency, we show that more transparency monetary policy operating procedures is associated with less inflation variability though not also with less inflation persistence.
Keywords: Central Bank Transparency; Monetary Policy; Inflation Variability; Political Determinants
JEL Codes: E0; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Central Bank Transparency (E58) | Inflation Variability (E31) |
| Central Bank Transparency (E58) | Inflation Persistence (E31) |
| Political stability (P16) | Central Bank Transparency (E58) |
| Rule of Law (K00) | Central Bank Transparency (E58) |
| Government Efficiency (H11) | Central Bank Transparency (E58) |
| Central Bank Transparency (E58) | Inflation Variability (E31) |
| Central Bank Transparency (E58) | Inflation Persistence (E31) |