Transparency Of Monetary Policy And Its Effect Studies

Historically, secrecy of monetary policy was once the tradition of central banks. Until 1990. New Zealand first adopted the inflation targeting in practice of monetary policy, and had achieved good results. Since then, central banks have abandoned the mysterious practice, and gradually moving towards transparency. With the development of information technology, the monetary policy has become the result of the game between the central bank and the public. When central bank desire and implement the monetary policy, it has to pay attention to their own credibility establishment, maintain economic and social stability, and also keep some flexibility to achieve other objectives. And all above depends not only on the central bank itself, but also depends on public attitudes and expectations.This paper using expectations theory, asymmetric information theory, game theory and other analysis tools, analyzes the theory of monetary policy transparency, constructed a relatively complete theoretical framework. First, it summarizes the theoretical basis for transparency and the research status; then analyzes the reasonability of presence of transparency in monetary policy is. The second chapter analyzes the relationship between the transparency and credibility establishment of the central bank. Transparency can help to establish the credibility of central banks to address the dynamic inconsistency problem, but the central bank must pay off the discretionary or the rules; the third chapter analyzes the relationship between transparency and central bank independence. Transparency can provide a guarantee for the independence that allows the central bank being more accountable, but the central bank independence has the other extreme-too conservative. The fourth chapter is the introduction of transparency effects. Transparency effects can be divided into two effects:"uncertainty effect" and the "incentive effect." It can reduce the cost of the private sector and improve the predictability of the policy, but it may increase the central bank's revised cost. Since transparency has two sides, then what should be the best transparency? Chapter five gives two equilibriums should consider for moderate transparency:the balance between monetary control and transparency; and the balance between operational flexibility and central bank credibility. The final chapter analyzes the current situation of Chinese monetary policy transparency, made a brief analysis of the problem and the corresponding policy advice.