Central bank transparency leads to better economic outcomes for society.
The article explores how transparency and credibility affect monetary policy when the central bank's goals are hidden. A less credible bank tends to create higher inflation but lower employment than expected. Increasing transparency makes the bank's reputation more tied to its actions, leading to more moderate policies. Full transparency is good for society but not always for the bank. Surprisingly, if the bank's goals are fully visible, it can lead to the worst outcomes.