A central bank’s transparency about its objectives

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Transparency, Expectations, and Forecasts: A Reprint from the “Economic Review”

A central bank’s transparency about its objectives

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By Andrew Bauer (au); Robert A. Eisenbeis (au); Daniel F. Waggoner (au); Tao Zha (au)
Year: 2006
Pages: 25
Binding Paperback

Product Code: 1437900437

Description

A central bank’s transparency about its objectives, economic outlook, & policy changes may affect the public’s views about future economic & financial conditions. In keeping with this theory, since 1994 the Fed. Open Market Comm. has gradually increased the transparency of its statements accompanying changes in the fed. funds rate target. This article investigates whether private agents’ ability to predict the economy’s direction has improved since 1994. The analysis focuses on forecasts of macroecon. variables such as inflation, gross domestic product growth, & unemployment & policy variables such as short-term interest rates. There is little evidence that transparent monetary policy enhances the public’s ability to predict bus. cycles. Tables.

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