Do Monetary Policy Transparency, Independence and Credibility Enhance Macro-Financial Stability?

31 Pages Posted: 3 Dec 2008 Last revised: 9 Mar 2009

See all articles by Eleftherios Spyromitros

Eleftherios Spyromitros

University of Angers - Bureau of Economic Theory and Application (BETA)

Sukriye Tuysuz

University of Angers - Bureau of Economic Theory and Application (BETA)

Date Written: December 1, 2008

Abstract

It is generally agreed that the credibility, independence and transparency of the central bank have produced better overall policy outcomes and reduced the financial market uncertainty. This paper, using panel data approach, evaluates the effect of, respectively, the central bank transparency, independence and credibility on, respectively, the level and variability of realized and expected economic performance.

It also analyzes the effects of central banks characteristics on the level and variability of Government bond rate. The results obtained suggest that central bank independence does not influence the realized and expected level and variability of economic performance. As for the central bank transparency, our findings are consistent with the view that greater transparency could have a desirable reputational effect that lowers inflation expectations and long-term nominal interest rates. Finally, our results show that central bank credibility negatively influences the level and variability of Government bond rate.

Keywords: Central bank transparency, credibility, independence, financial stability

JEL Classification: E44, E58, E64

Suggested Citation

Spyromitros, Eleftherios and Tuysuz, Sukriye, Do Monetary Policy Transparency, Independence and Credibility Enhance Macro-Financial Stability? (December 1, 2008). Available at SSRN: https://ssrn.com/abstract=1309737 or http://dx.doi.org/10.2139/ssrn.1309737

Eleftherios Spyromitros (Contact Author)

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France

Sukriye Tuysuz

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France

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