The effect of central bank transparency on inflation persistence

Abstract

In this paper, we examine the effect of central bank transparency on inflation persistence, using panel data analysis. The existing literature has shown a significant impact of central bank transparency on macroeconomic variables, such as inflation, but not many efforts have been made about its effect on inflation persistence. We use yearly data for 14 countries and the Eurozone (ECB). We find that monetary policy transparency has a negative statistically significant impact on inflation persistence, while controlling also for important variables such as GDP growth, interest rates, economic openness and unit labour cost.