The role of central bank transparency for guiding private sector forecasts

S.C.W. Eijffinger, M. Ehrmann, M. Fratzscher

Research output: Contribution to journalArticleScientificpeer-review

52 Citations (Scopus)

Abstract

Central banks have become remarkably more transparent over the last few decades. In this paper, we study the effects of this evolution, focusing on whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables. We use a large set of proxies for central-bank transparency in 12 advanced economies. We find evidence for a sizeable effect (e.g., by announcing a quantified inflation objective, or by publishing inflation and output forecasts). However, there are decreasing marginal effects to increases in transparency, and the disagreement among the expectations of the general public is not affected. This suggests that there are possible limits to transparency.
Original languageEnglish
Pages (from-to)1018-1052
JournalThe Scandinavian Journal of Economics
Volume114
Issue number3
DOIs
Publication statusPublished - 2012

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