Optimal Economic Transparency

Carl E. Walsh

94 citations0/0 files storedRePEc: Research Papers in Economics

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Economic theories and models

Abstract

In this paper, I explore the optimal extent to which the central bank should disseminate information among private agents.Individual firms are assumed to have diverse private information, and the central bank provides public information either implicitly, by setting its policy instrument, or explicitly, by making announcements about its short-run targets.The optimal degree of economic transparency is affected differently by cost and demand shocks.More-accurate central bank forecasts of demand shocks reduce optimal transparency, while more-accurate forecasts of cost shocks increase optimal transparency.Increased persistence in demand (cost) disturbances increases (reduces) optimal transparency.

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References

2002Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve 2002Social Value of Public Information 2002Some Evidence on the Importance of Sticky Prices 1986A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information 2002Central Bank Transparency 2006How transparant are Central Banks?2021Imperfect Common Knowledge and the Effects of Monetary Policy 2006Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply

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2012Sources of disagreement in inflation forecasts: An international empirical investigation 2016Incomplete Information in Macroeconomics 2013Inflation targeting in a learning economy: An ABM perspective 2015Do Central Bank Forecasts Influence Private Agents? Forecasting Performance versus Signals 2012How Effective Is Central Bank Forward Guidance?2015Real Rigidity, Nominal Rigidity, and the Social Value of Information

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