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Transparency of Central Bank Preferences

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  • Hahn Volker

    (Center of Economic Research,Washington, United States of America)

Abstract

In this paper, we examine whether the transparency of the central bank’s preferences is desirable. We make two major points. First, in the literature on preference transparency variance-reduction frameworks are often adopted. As a consequence a change in the degree of transparency affects the magnitude of information asymmetries, but at the same time it implies a rather arbitrary effect on the distribution of preferences. We present a clean framework without this problem. Second, using a very general specification of shocks to the central bank’s preferences, we show that society prefers transparency if it sufficiently values the employment target, whereas it prefers opacity if it estimates inflation as sufficiently important.

Suggested Citation

  • Hahn Volker, 2009. "Transparency of Central Bank Preferences," German Economic Review, De Gruyter, vol. 10(1), pages 32-49, February.
    • Handle: RePEc:bpj:germec:v:10:y:2009:i:1:p:32-49
    DOI: 10.1111/j.1468-0475.2008.00440.x
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    8. Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006. "How transparent are central banks?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 1-21, March.
    9. Hans Gersbach & Volker Hahn, 2008. "Should the individual voting records of central bankers be published?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 655-683, May.
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    Cited by:

    1. Hahn, Volker, 2016. "Designing monetary policy committees," Journal of Economic Dynamics and Control, Elsevier, vol. 65(C), pages 47-67.
    2. BOKINO Régis, 2015. "Transparency in the two central banks of African franc zone: assessment and international comparison," Cahiers du GREThA (2007-2019) 2015-22, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    3. Maria Demertzis & Andrew Hughes Hallett, 2015. "Three different approaches to transparency in monetary policy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(3), pages 277-300, December.
    4. Petra M. Geraats, 2007. "The Mystique of Central Bank Speak," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 37-80, March.
    5. Malcolm Edey, 2006. "An Australian perspective on inflation targeting, communication and transparency," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 3-24, Bank for International Settlements.

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    Keywords

    Central bank objectives; transparency;

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