Transparency, communication and expectations: consequences for monetary policy

Abstract

ABSTRACT Nowadays, due to an increase in the number of central banks that have adopted inflation targeting, one of the main objectives in the conduction of monetary policy is to guide the public expectations. The literature concerning the debate rules versus discretion in monetary policy has revealed that the use of a strategy that guides the public expectations reduces the occurrence of the inflation bias. This article shows how an efficient communication process, which increases the central bank transparency, affects the public expectations and its consequences for the conduction of monetary policy. The main conclusion is that an environment, which permits the anticipation of future monetary policy actions by the public, improves the efficiency of the policy. Key words: Monetary policy; transparency; expectations. Classificação JEL: E52, E43 Artigo recebido em ago. 2009 e aceito para publicação em jun. 2011.