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SUMMARY:Transparency of Monetary Policy in a Small Open Economy - Ana Neve
 s
DTSTART:20100302T131000Z
DTEND:20100302T140000Z
UID:TALK22248@talks.cam.ac.uk
CONTACT:Dr Hilary Powell
DESCRIPTION:Transparency of monetary policy has recently received a great 
 deal of attention in the economic literature. Yet there has been no analys
 is of the open economy case. This paper investigates the subject and provi
 des some interesting theoretical results. In particular\, I show that tran
 sparency is especially beneficial for central banks in large economies or 
 that enjoy low credibility. Setting a target for inflation and making it p
 ublic leads to smaller losses to the central bank and\, in a cashless econ
 omy\, higher welfare. Moreover\, the model suggests that central banks tha
 t move from regimes of intermediate transparency (when communication does 
 convey some information\, although fuzzy) to a regime of higher openness (
 like inflation targeting) should be more successful in stabilizing both th
 e output gap and the rate of inflation. Finally\, transparency is also ben
 eficial for exchange rate stability\, particularly for central banks that 
 lack credibility. These results are consistent with the empirical evidence
  that higher transparency leads to lower price and exchange rate volatilit
 y.
LOCATION:Entertaining Room\, Darwin College
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