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Does monetary policy transparency reduce disinflation costs?
Author(s) -
Chortareas Georgios,
Stasavage David,
Sterne Gabriel
Publication year - 2003
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00365
Subject(s) - disinflation , transparency (behavior) , economics , monetary economics , monetary policy , publication , inflation targeting , central bank , inflation (cosmology) , macroeconomics , econometrics , business , computer science , physics , computer security , theoretical physics , advertising
We examine the relationship between central bank transparency and the costs of disinflation. We provide a model where disinflation efforts imply a higher sacrifice ratio when the public is not fully convinced about the central bank's resolve to reduce inflation and show that information dissemination by the central bank can remedy this problem. To assess the empirical implications we estimate sacrifice ratios based on individual estimates of Phillips curves in 21 OECD economies. Using transparency indices pertaining to both the detail with which central banks publish forecasts and the means by which policy decisions are explained, we find that a higher degree of central bank transparency is associated with lower sacrifice ratios. This result is robust to alternative estimation methods and periods considered.