Which Aspects of Central Bank Transparency Matter? A Comprehensive Analysis of the Effect of Transparency on Survey Forecasts

We investigate whether a higher level of central bank transparency can reduce the degree of disagreement across individual forecasters, and whether it can improve the forecasting performance of survey respondents. The analysis is carried out on a panel data set that is richer than those used by previous studies. This unique data set allows us to test both for causality and for misspecification. Moreover, it allows us to identify the effects of various aspects of transparency separately and to assign weights to them reflecting their relative importance in reducing uncertainty. Finally, we construct a new composite measure of transparency using the estimated weights.