Transparency and Monetary Policy Effectiveness

Romain Baeriswyl (1) , Camille Cornand (2)

1 Swiss National Bank
2 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne

This article analyses the effects of economic transparency on the optimal monetary policy in an economy affected by demand shocks. In an environment of imperfect common knowledge, demand shocks create a trade-off between stabilising the price level and stabilising the output gap. The monetary policy implemented by the central bank tends, on the one hand, to offset demand shocks but, on the other hand, to distort the economy because of its mistaken view of the fundamental state of the economy. Transparency is optimal as long as the central bank does not weight the stabilisation of the output gap too heavily in its objective function.

Mots clés: Information; monetary policy; transparency; information; D82

Domaines: Economies et finances

Romain Baeriswyl, Camille Cornand. Transparency and Monetary Policy Effectiveness. Annales d'Economie et de Statistique, 2011, 103-104, pp. 165-184. ⟨halshs-00651028v2⟩