Abstract:

A recent theoretical literature highlighted the potential dangers of further increasing information disclosure by central banks. This paper gives a continuous empirical investigation of the existence of an optimal degree of transparency in the lines of van der Cruijsen et al. (2010). We test a quadratic relationship between central bank transparency and the inflation persistence by introducing some technical and economic modifications. Particularly, we used three new measures of transparency. An appropriate U shape test that was made through a Stata routine, recently developed by Lind and Mehlum (2010), indicates a robust optimal intermediate degree of transparency, but its level is not. These results were obtained using a panel of 11 OECD central banks underthe period 1999-2009.