The Effect of Central Bank Transparency on the Output Volatility

Subject Areas : Labor and Demographic Economics

Mohamad ali Ehsani ¹ , Reza Izadi ²

1 - عضو هیات علمی گروه اقتصاد دانشگاه مازندران عضو هیات داوران مجله مدلسازی اقتصادی
2 - Assistant Professor in Economics, Allameh Mohaddes Nouri University, Iran.

Received: 2019-12-31 Accepted : 2019-12-31 Published : 2019-11-22

Keywords: Output volatility, E4, Keywords: Central Bank Transparency, Generalized Method of Moments (GMM). JEL Classification: E0, F0,

Abstract :

This paper investigates the effect of central bank transparency on output volatility in selected states of the Organization of Islamic Cooperation (based on the maximum data availability) during the period 2003-2014. Applying the Arellano-Bond GMM estimation and using the Dincer and Eichengreen transparency index, we examine the effect of central bank transparency on output volatility. The results indicate that an increase in the level of central bank transparency will decrease output volatility up to a certain point, after which additional information from central banks begins to exacerbate it. Therefore, moving with caution towards monetary policy transparency is recommended since the output volatility can be reduced considerably, implying significant benefits for output stability.

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