Central Bank Transparency and the Signal Value of Prices: Comments and Discussion‪.‬

Benjamin M. Friedman: A firm belief in the miraculous healing power of central bank transparency is a core tenet of the new religion that the economics of monetary policy has somehow become. In the rush to dissociate themselves from the long-standing practices of their predecessors (and, one sometimes suspects, to avoid talking about their actual policy decisions), central bankers today tirelessly repeat the mantra that open communication with the public is fundamental to carrying out their assigned task. Economists reiterate the same conviction, albeit with little or no more analytical grounding to indicate just why, or how, enhanced transparency delivers the wonders claimed for it. Stephen Morris and Hyun Song Shin, in an interesting series of papers, have ventured the heresy that perhaps, under some conceivable circumstances, less transparency might be better than more. The question is plainly worth consideration. But wholly apart from whatever answer they may provide to the question of how much transparency is "just right," the potential value of Morris and Shin's work lies in the effort to spell out how central bank transparency matters in the first place. That alone would constitute a significant contribution to the discussion.