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An Independent Analysis
by
Economic Benefits
Increased monetary policy predictability
Improved central bankers’ performance (say
forecast efficiency)
How much transparency?
Complete transparency requires releasing information on
each step in monetary policy. Specifically it involves
information on the central bank’s objective function,
institutional arrangement of the central bank with the
government, the macroeconomic forecasts, monetary
policy strategy, decision making process, state of the
economy, operational targets of the monetary policy and
information on achieving these targets.
However there is a trade-off between openness and the
clarity of information released
Objectives of the Study
Political Trnsparency
0.5 0.5
0.5
score out of 1
0.25
0
0
Formal Objectives Quantitative Targets Institutional
Arrangements
Results – Economic Transparency
Economic Data
Quarterly data on money supply and inflation but not
available on unemployment, GDP and capacity
utilization
Macroeconomic Model
Question of existence
Any model used for forecasts
Central Bank’s Internal Forecasts
Short term forecasts for output and inflation
Not the medium-term forecasts
Forecast methodology
Rough projections and not the internal forecasts, as
policy instrument path is missing – how to guess the
CB commitment
Results…..
0.25
0
0
Economic Data Policy Models Central Bank Forecasts
Results – Procedural Transparency
Explicit Strategy
uncertainty about both the degree as well as
the timings of the monetary authority’s
leaning against the wind
Even monetary policy objectives are not
explicit
0.25
0 0
0
Prompt Announcement Policy Explanation Policy Inclination
Results – Operational Transparency
Control Errors
Explanation for target miss of M2 in reports
Policy Evaluation
Superficial analysis and not the exact
contribution
Results…..
0.5 0.5
0.5
0
Control errors Transmission Policy Evaluation
Disturbances
Overall Result
Transparency in Pakistan
2.5
2
2
score out of 3
1.5
1 1
1
0.5
0.5
0
0
O perational
Political
Procedural
Economic
Policy
Transparency Type
Comparison
Transparency Level of Different Central Banks
15 14 14
13
13
score out of 15
10.5 10.5
11 10
9
9 8
7.5
7
4.5
5
Pakistan
UK
US
Canada
Euro Zone
Japan
Zealand
Australia
Sweden
Switzerland
New
An Analysis for Comparison
Transparency Ranking with in One Standard
Deviation
15.0
10.0
5.0
0.0
Thanks for your patience