| Abstract: |
Transparency has become one of the key features of monetary policy. This paper
analyzes the reputational incentives related to transparency, focusing on the
publication of central bank forecasts. A simple dynamic monetary policy game
shows how transparency reduces inflation, as has been found empirically.
Although transparency exposes weak central banks, the negative market feedback
in response to secrecy could provide a sufficiently strong inducement to
become transparent. Thus, reputational concerns could lead to transparency,
even without formal disclosure requirements. |