Transparency and ambiguity in Central Bank safety net operations.

Publisher: International Monetary Fund in Washington, D.C

Written in English
Published: Pages: 28 Downloads: 19
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Edition Notes

Includes bibliographical references.

SeriesIMF working paper -- WP/97/138
ContributionsInternational Monetary Fund.
The Physical Object
Pagination28 p. ;
Number of Pages28
ID Numbers
Open LibraryOL17361130M

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility Menno Middeldorp Federal Reserve Bank of New York Staff Reports, no. May JEL classification: D83, E47, E58, G14 Abstract Central banks worldwide .   Abstract. Central bank transparency has become one of the key features of monetary policy recently. This survey article provides a structured review of the theoretical literature on the consequences of transparency of monetary policy, proposing a distinction between uncertainty and incentive effects of transparency. For release on delivery p.m. EDT, ( a.m. local time, ) Central Bank Independence, Transparency, and Accountability. and also illustrates how transparency can actually have an impact on unsolicited bank credit ratings, which may in turn provide an incentive for banks to disclose information. a) the credit rating agencies’ perspective on bank transparency Moody’s asserts that transparency is an important consideration when rating a bank.

A discretionary safety net, with no set boundaries, only feeds this cycle by giving market participants reason to believe that new, complex arrangements ultimately will be protected. It requires an ever-growing reach of financial regulation, and undermines the market discipline that helps align financial risk-taking with broader societal interests.   Delay of both the Net Stable Funding Ratio and the Fundamental Review of the Trading Book is urged, in order to conduct further review of their impact, as they may be duplicative of other rules. Review or modification of the impact of the Current Expected Credit Loss (CECL) standard on bank capital is also suggested. ambiguity of the central bank over the position of the short run aggregate supply curve. We consider both a rule based and a discretionary monetary policy. 7 In the next section, we discuss decision making under ambiguity and the equilibrium con-cept we use in this paper. In Section 3 we derive the e ffect of strategic ambiguity about. Can Central Bank Transparency Go Too Far? 49 undemocratic. Although it makes sense to insulate central banks from short-run pressures to pursue overly expansionary monetary policy, basic democratic principles require that the central bank be accountable for its actions: this requires that the public understands what the central bank is doing.

‘Bernanke and other central bankers have been looking for this Holy Grail of transparency, a set of numbers that will tell you what that they are going to be doing,’ said Stephen King, chief. With an independent central bank and its stability-oriented strategy, the euro area has a highly predictable monetary policy. There is no ambiguity as to how monetary policy will respond to economic, including fiscal developments: it will respond to the extent that they pose risks to price stability. The last decades have shown a tendency towards higher central bank transparency. It became customary for central bankers to explain their monetary policy decisions in detail and for them to publish inflation forecasts. This leads to the question of how central bank transparency is entangled with price stability and inflation volatility. The first view of central bank transparency to consider is what I will term “the reassuring view,” which is the view that the central bank engenders greater good will in the public sphere and the markets simply by the fact of communicating its general intentions. The key information released by the central bank in operational terms are.

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[Charles Enoch; Peter Stella; May Y Khamis; International Monetary Fund. Monetary and Exchange Affairs Department.] -- It has long been recognized that a bank failure may lead to external costs beyond the costs incurred by those directly involved in the bank failure. The Central Bank of Ireland is the central competent administrative authority for the purpose of the Regulations.

The Irish Auditing & Accounting Supervisory Authority (IAASA) is the relevant competent authority for the purposes of Article 24(4)(h) of the Transparency Directive. ENHANCING BANK TRANSPARENCY Public disclosure and supervisory information that promote safety and soundness in banking systems 1.

INTRODUCTION 1. This report, issued by the Basle Committee on Banking Supervision,1 discusses the role of transparency and disclosure of information in effective market discipline and effective. Transparency Definition. Transparency means that the central bank provides the general public and the markets with all relevant information on its strategy, assessments and policy decisions as well as its procedures in an open, clear and timely manner.

Today, most central banks, including the ECB, consider transparency as crucial. their emergency operations. The rise of central bank transparency can be understood in a number of related ways. First, it is part of a broader trend, respond-ing to popular pressure, to make government more responsive to the public.

In New Zealand, for example, the increase in central bank transparency associated with the Reserve Bank Act of Enoch, Carles/Stelle, Peter/Khamis, May (): Transparency and Ambiguity in Central Bank Safety Net Operations; International Monetary Fund Working Paper 97/   According to the Bank of England, “A transparent, accountable and well-governed central bank is essential not only for effective policy, but also for democratic legitimacy.” More clarity in the provision of public information and improvements to internal controls within banks are needed not only to improve accountability, but also to repair.

Whether enhanced central bank transparency is favourable is not evident from the literature. For instance, the theoretical model by Morris and Shin () shows that higher transparency can even have an adverse effect on the quality of private forecasts.

1 They argue as follows. If central banks have only noisy information on the future evolution of some macro variables, and their noisy. Central Bank Transparency: Causes, Consequences and Updates1 Nergiz Dincer and Barry Eichengreen February Abstract We present updated estimates of central bank for countries up through and use them to analyze both the determinant and consequences of monetary policy transparency in an integrated econometric framework.

Legislation applicable to Transparency Directive Legislation relevant to the Transparency Directive is listed below. Where the links provided are to users should note the disclaimer on the Irish Statute Book website.

The following list is not exhaustive and is. Comment: A copy that has been read, but remains in clean condition. All pages are intact, and the cover is intact. The spine may show signs of wear. Pages can include limited notes and highlighting, and the copy can include previous owner : Harold Wallgren.

Greater transparency in central bank operations is the most dramatic change in the conduct of monetary policy in recent years. In this paper we present new information on its extent and effects.

We show that the trend is general: a large number of central banks have moved in the direction of greater transparency since the late s.

a second-best environment where the central bank is able to offset other inefficiencies by exploiting its informational advantage.7 Ultimately, however, the question of whether central bank transparency delivers tangible benefits is an empirical one, and one that we address in section 5 of the paper.

Priscilla Chiu, "Transparency versus constructive ambiguity in foreign exchange intervention," BIS Working PapersBank for International Settlements.

Charles Enoch, "Transparency and Ambiguity in Central Bank Safety Net Operations," IMF Working Papers 97/, International Monetary Fund. Jansen, David-Jan & De Haan, Jakob, Then, using a recently constructed index of Central Bank transparency due to Eij¢nger and Geraats (), we test whether imperfect transparency has had the predicted e¤ects in the main OECD.

Priscilla Chiu, "Transparency versus constructive ambiguity in foreign exchange intervention," BIS Working PapersBank for International Settlements. Charles Enoch, "Transparency and Ambiguity in Central Bank Safety Net Operations," IMF. The FRBNY say that the central bank’s role as lender of last resort (standing ready to lend reserves on demand to facilitate the payments system) exposes them to credit risk (bank failure) and “may also generate moral hazard problems and exacerbate the too-big-to-fail problem, whereby regulators would be reluctant to close a financially.

Transparency International EU is part of the global anti-corruption movement, Transparency International, which includes over contribute “to the safety and soundness of credit national central bank under the Emergency Liquidity Assistance (ELA) procedure.

Since ultimate control. Banking Operations provides an introduction to the main operations of a bank including bank services and products, types of customers, operating accounts, lending and securities.

Services covered include: savings and investment accounts, current accounts, lending facilities, money transmission and payment services, share dealing services and advice, investment advice and portfolio management Format: Paperback. Greater transparency in central bank operations is the most dramatic change in the conduct of monetary policy in recent years.

In this paper we present new information on its extent and effects. We show that the trend is general: a large number of central banks have moved in the direction of greater transparency. Importantly, transparency can also help improve the effectiveness of policy.

The ability of markets to understand and predict the moves by the central bank improves, for example, its ability to steer interest rates. Central bank actions are enhanced if expectations are consistent with them, and expectations are influenced by communication.

A central bank is financially strong if it possesses resources sufficient to attain its fundamental policy objective(s). Once endowed with those resources, relations between government and central bank should be designed so that significant changes in central bank financial strength do not occur unless necessitated by changes in policy objectives.

Although rarely acknowledged explicitly, the financial strength of an independent and credible central bank must be commensurate with its policy tasks and the risks it faces. This paper explores the relationship between central bank financial strength and policy outcomes, stressing the importance of financial independence as a fundamental support to policy credibility.

transparency would help to establish understandable rules and procedures, to eliminate unnecessary market uncertainties and volatility, and to minimize the costs of anti-inflation monetary policy. Transparent monetary policy is characterized by openness and a lack of secrecy and ambiguity.

Transparency. of the European Central Bank. THE MIRAGE OF UNLIMITED TRANSPARENCY Today, there is a general consensus among central bankers that transparency is not only an obligation for a public entity, but also a real benefit to the institution and its policies.

For a long time, however, central banks followed quite a different tradition. Sometimes. In terms of defining the concept, previous attempts identify the lack of transparency with the Central Bank having private information about the nature of the shocks (Cukierman,Cukierman, ); or the public being unclear as to what the Central Bank’s objectives (Cukierman and Meltzer, ) or even preferences (Nolan and Schaling.

notion of central bank transparency and conclude. 2 A Transparent Central Bank The two-period model is inhabited by a monetary policy maker, refered to as the central bank, and a private sector.3 In each period, the central bank™s welfare is increasing in output and decreasing in squared deviations of in⁄ation from its optimal level, normalised.

the banking sector as a whole. In a bank run model with two banks, Chen and Hasan () show that enhancing transparency of one bank may reduce depositor welfare as it increases the chance of a (inefficient) contagious run on the other bank.

Hence, as in our model, enhancing transparency may cause inefficient bank runs. In contrast to. Based on a survey of 10 central banks and a review of existing literature, this paper examines the choice between transparency versus ambiguity in central banks' foreign exchange intervention.

Three case studies - Canada, Hong Kong SAR and Japan - are presented to highlight the problems facing central banks in this choice, and the changes that. Enoch, Charles, Peter Stella, and May Kharmis,“Transparency and ambiguity in central bank safety net operations,” International Monetary Fund, working paper, No.

97/ Google Scholar.Central Bank attaches explicit weights to both its objectives. It is important to de ne transparency in its most general form and only then impose normalisa-tion restrictions, in order to account for all relevant information.

We therefore consider a Central Bank which assigns positive numbers, a .for central bank transparency that comprises the political, economic, procedural, policy and operational aspects of central banking. The index is compiled for nine major central banks. It is based on a detailed analysis of actual information disclosure and reveals a rich variety in the degree and dynamics of central bank transparency.