Monetary policy transparency: transparent about what?
Article first published online: 2 SEP 2003
The Manchester School
Volume 71, Issue 5, pages 478–497, September 2003
How to Cite
Thornton, D. L. (2003), Monetary policy transparency: transparent about what?. The Manchester School, 71: 478–497. doi: 10.1111/1467-9957.00363
- Issue published online: 2 SEP 2003
- Article first published online: 2 SEP 2003
This paper puts the issue of monetary policy transparency into a broad economic perspective. In so doing, it narrows the focus from that which frequently appears in this literature. The analysis is predicated on the assertion that the sole economic argument for transparency is policy effectiveness—transparency is desirable if it enhances the effectiveness of policy and is not if it does not. In cases where transparency neither enhances nor impairs the effectiveness of policy, the case for transparency can be argued on non-economic grounds. This analysis has implications for several policy/transparency issues. Important among these is the assumption in this literature that inflation and output must be viewed by policymakers as substitutes. I suggest that policymakers might generate a better inflation/output outcome if they thought of inflation and output objectives as complements rather than substitutes.