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Political Pressures and Monetary Mystique

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  • Petra Geraats

Abstract

Central bank independence and transparency have become best practice in monetary policy. This paper cautions that transparency about economic information may not be beneficial in the absence of central bank independence. The reason is that it reduces monetary uncertainty, which could make the government less inhibited to interfere with monetary policy. In fact, a central bank could use monetary mystique to obtain greater insulation from political pressures, even if the government faces no direct cost of overriding. As a result, economic secrecy could be beneficial and provide the central bank greater political independence.

Suggested Citation

  • Petra Geraats, 2007. "Political Pressures and Monetary Mystique," CESifo Working Paper Series 1999, CESifo.
    • Handle: RePEc:ces:ceswps:_1999
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    References listed on IDEAS

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    Cited by:

    1. Nergiz Dincer & Barry Eichengreen, 2009. "Central Bank Transparency: Causes, Consequences and Updates," NBER Working Papers 14791, National Bureau of Economic Research, Inc.
    2. Dai, Meixing & Sidiropoulos, Moise, 2008. "Fiscal Policy in a Monetary Union in the Presence of Uncertainty about the Central Bank Preferences," MPRA Paper 13907, University Library of Munich, Germany, revised Mar 2009.
    3. Dai, Meixing & Sidiropoulos, Moïse, 2011. "Monetary and fiscal policy interactions with central bank transparency and public investment," Research in Economics, Elsevier, vol. 65(3), pages 195-208, September.
    4. Alex Cukierman, 2009. "The Limits of Transparency," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 38(1‐2), pages 1-37, February.
    5. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
    6. Meixing Dai & Moïse Sidiropoulos, 2009. "Public investment, distortionary taxes and monetary policy transparency," Working Papers of BETA 2009-30, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    More about this item

    Keywords

    transparency; monetary policy; political pressures;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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