Mahdi Yazdani; Raana Shokouei Donighi
Abstract
Macroeconomic instability is an important obstacle to the real growth of the economy and its sustainability. In this article, two methods have been used to investigate the impact of transparency on macroeconomic stability in emerging economies using simultaneous equations with panel data for the ...
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Macroeconomic instability is an important obstacle to the real growth of the economy and its sustainability. In this article, two methods have been used to investigate the impact of transparency on macroeconomic stability in emerging economies using simultaneous equations with panel data for the period 1998-2014. In the first method, two equations for central bank transparency and stability have been considered and the mutual effect of these two variables has been investigated. In the second method, three equations for the variables of stability, including inflation, production gap and real exchange rate gap, and one equation to measure the effect of these variables on transparency are used simultaneously. The results of the study show that the transparency of the central bank is one of the factors affecting the stability of the macroeconomics. Also, the square of the central bank's transparency variable has a negative and significant relationship with macroeconomic stability. Meanwhile, the transparency of the central bank has an inverse relationship with inflation and the real exchange rate gap, and there is a two-way relationship between the transparency of the central bank and inflation. Finally, the effect of central bank transparency on production gap and vice versa is not significant.
