Political Pressures and Monetary Mystique
Geraats, Petra M.
Cambridge Working Papers in Economics
Faculty of Economics
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Geraats, P. M. (2006). Political Pressures and Monetary Mystique. https://doi.org/10.17863/CAM.5388
Central bank independence and transparency have become best practice in monetary policy. This paper cautions that transparency about economic information may not be beneficial in the absence of central bank independence. The reason is that it reduces monetary uncertainty, which could make the government less inhibited to interfere with monetary policy. In fact, a central bank could use monetary mystique to obtain greater insulation from political pressures, even if the government faces no direct cost of overriding. As a result, economic secrecy could be beneficial and provide the central bank greater political independence.
Classification-JEL: E58, E52, D82, Transparency, monetary policy, political pressures
This record's DOI: https://doi.org/10.17863/CAM.5388
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