Abstract
Federal Reserve officials and many observers of monetary policy claim that the implementation of monetary policy has become more “transparent” over the last decade. This paper argues that monetary policy is anything but transparent because multiple and conflicting goals for monetary policy still exist, precise targets for these goals never are defined, the Fed’s economic model is unknown to the public and, by confusing its apparent intermediate target variable with its true policy instrument, actions taken to be stimulative can be contractionary and vice versa.
This is a preview of subscription content, log in via an institution to check access.
References
Barnett, W. A., & Serletis, A. (Eds.) (2000). The theory of monetary aggregation. Amsterdam: North-Holland.
Belongia, M. T., & Binner, J. A. (Eds.) (2000). Divisia monetary aggregates: Theory and practice. London: Palgrave.
Bernanke, B. S. (November 15, 2005). Nomination hearing before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate.
Blinder, A. S. (2003). Central bank credibility: Why do we care? How do we build it?. American Economic Review, 93, 1421–1431.
Carpenter, S. B. (April 2004). Transparency and monetary policy: What does the academic literature tell policymakers? Division of Monetary Affairs, Board of Governors of the Federal Reserve System.
Cukierman, A. (2002). Are contemporary central banks transparent about economic models and objectives and what difference does it make? Federal Reserve Bank of St. Louis Review, 84(4), 15–35.
Dorsey, R. E. (2000). Neural networks with Divisia money: Better forecasts of future inflation? In M. T. Belongia & J. M. Binner (Eds.), Divisia monetary aggregates: Theory and practice (pp. 28–43). London: Palgrave.
Friedman, M., & Schwartz, A. J. (1963). Money and business cycles. Review of Economics and Statistics, 45(1), 32–64.
Greenspan, A. (2002). Transparency in monetary policy. Federal Reserve Bank of St. Louis Review, 84(4), 5–6.
Kahn, G. A. (2007). Communicating a policy path: The next frontier in central bank transparency? Federal Reserve Bank of Kansas City Economic Review, 87(1), 25–51.
Laidler, D. (2004). Monetary policy after bubbles burst: the zero lower bound, the liquidity trap and the credit deadlock. Canadian Public Policy, 30(3), 333–340.
Meltzer, A. H. (1991). The Fed at seventy-five. In M. T. Belongia (Ed.), Monetary policy on the 75th anniversary of the Federal Reserve system (pp. 3–65). Amsterdam: Kluwer.
Taylor, J. B. (1993). Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy, 39, 195–214.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Belongia, M.T. Opaque rather than transparent: Why the public cannot monitor monetary policy. Public Choice 133, 259–267 (2007). https://doi.org/10.1007/s11127-007-9227-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11127-007-9227-0