DID YOU KNOW? DTIC has over 3.5 million final reports on DoD funded research, development, test, and evaluation activities available to our registered users. Click HERE
to register or log in.
Monetary Policy Delelgation and Transparency of Policy Targets: A Positive Analysis
Working paper no. 113
UNIVERSITAET DER BUNDESWEHR MUENCHEN NEUBIBERG (GERMANY F R) FAKULTAET FUER LUFT- UND RAUMFAHRTTECHNIK
Pagination or Media Count:
We show that, in a two-stage model of monetary policy with stochastic policy targets and asymmetric information, the transparency regime chosen by the central bank does never coincide with the regime preferred by society. Independent of societys endogenous choice of delegation, the central bank reveals its inflation target and conceals its output target. In contrast, society would prefer either transparency or opacity of both targets. As a conclusion, the choice of the transparency regime should be part of the optimal delegation solution.
APPROVED FOR PUBLIC RELEASE