1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The Role of Transparency in the Conduct of Monetary Policy

In contrast to the once prevailing norm of secrecy and opaqueness, transparency has now become one of the main features characterising the conduct of monetary policy. Detailed analysis of eleven OECD central banks shows that communication practices have converged markedly in the direction of ever greater transparency. Empirical evidence is consistent with the hypothesis that transparency contributes to the successful conduct of monetary policy: higher transparency is a typical element of monetary frameworks that are associated with better anchored inflation expectations and more stable inflation outcomes. Despite this general trend toward increased transparency, however, central banks differ in actual communication practices. There is a particular divergence with respect to transparency in the decision-making process and communication regarding future policy inclination. Although the appropriate degree of transparency in these areas is an unsettled issue, the fact that financial dislocation is impairing conventional monetary transmission makes these two areas critical for policy implementation.

English

Keywords: communication, inflation expectation, transparency, monetary policy
JEL: E31: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Price Level; Inflation; Deflation; E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy; E50: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy, Central Banking, and the Supply of Money and Credit: General; E58: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Central Banks and Their Policies
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