Wednesday 8 October 2014, 1.00PM to 2.00pm
Speaker(s): Michael McMahon, University of Warwick
How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by
the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process. Keywords: Monetary policy, deliberation, FOMC, transparency, career concerns JEL Codes: E52, E58, D78
Location: ARRC Auditorium A/RC014
Admission: All welcome.