Journal Articles Annales d'Economie et de Statistique Year : 2011

Transparency and Monetary Policy Effectiveness

Abstract

This article analyses the effects of economic transparency on the optimal monetary policy in an economy affected by demand shocks. In an environment of imperfect common knowledge, demand shocks create a trade-off between stabilising the price level and stabilising the output gap. The monetary policy implemented by the central bank tends, on the one hand, to offset demand shocks but, on the other hand, to distort the economy because of its mistaken view of the fundamental state of the economy. Transparency is optimal as long as the central bank does not weight the stabilisation of the output gap too heavily in its objective function.
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Dates and versions

halshs-00651028 , version 1 (06-04-2012)
halshs-00651028 , version 2 (20-06-2018)

Identifiers

  • HAL Id : halshs-00651028 , version 2

Cite

Romain Baeriswyl, Camille Cornand. Transparency and Monetary Policy Effectiveness. Annales d'Economie et de Statistique, 2011, 103-104, pp. 165-184. ⟨halshs-00651028v2⟩
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