Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

M. Middeldorp

    Research output: Working paperAcademic


    Central banks worldwide have become more transparent. An important reason is
    that democratic societies expect more openness from public institutions.
    Policymakers also see transparency as a way to improve the predictability of
    monetary policy, thereby lowering interest rate volatility and contributing to
    economic stability. Most empirical studies support this view. However, there are
    three reasons why more research is needed. First, some (mostly theoretical) work
    suggests that transparency has an adverse effect on predictability. Second,
    empirical studies have mostly focused on average predictability before and after
    specific reforms in a small set of advanced economies. Third, less is known about
    the effect on interest rate volatility. To extend the literature, I use the Dincer and
    Eichengreen (2007) transparency index for twenty-four economies of varying
    income and examine the impact of transparency on both predictability and market volatility. I find that higher transparency improves the accuracy of interest rate forecasts for three months ahead and reduces rate volatility.
    Original languageEnglish
    Place of PublicationUtrecht
    PublisherUU USE Tjalling C. Koopmans Research Institute
    Number of pages38
    Publication statusPublished - 2011

    Publication series

    NameDiscussion Paper Series / Tjalling C. Koopmans Research Institute
    ISSN (Electronic)2666-8238


    • Central bank communication
    • interest rate forecasts
    • central bank transparency
    • financial market efficiency


    Dive into the research topics of 'Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility'. Together they form a unique fingerprint.

    Cite this