Chapter 6: Central Bank Transparency: Where, Why and With What Effects? Nazire Nergiz Dincer and Barry Eichengreen
6. Central bank transparency: where, why and with what eﬀects? Nazire Nergiz Dincer and Barry Eichengreen1 INTRODUCTION Transparency represents the most dramatic diﬀerence between central banking today and central banking in earlier periods.2 In recent years, a number of central banks have moved in the direction of greater transparency about their objectives, procedures, rationales, models and data. The question is whether the trend is widespread and whether it is likely to be transitory or enduring. Below we show that this movement in the direction of greater policy transparency is remarkably general. The answer to the question of whether it is likely to prove durable or to be a passing phase is likely to depend on the consequences; our analysis suggests that so far, there have been broadly favourable impacts on inﬂation and output variability. If institutional arrangements that produce favourable results retain public support, then this suggests that the trend towards greater monetary policy transparency is here to stay. While there have been a few studies along these lines, relatively little is known about actual trends in transparency or their correlates and implications. Theory has provided useful insights, as we shall see below, but it has not produced general conclusions. Our goal in this study is therefore to contribute new evidence. We shall construct an index of central bank transparency, distinguishing its components and dimensions, for a larger range of countries and years than in previous studies. Both the time dimension and the international dimension shed light...
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