اثر متقابل سیاست های پولی و مالی با شفافیت بانک مرکزی و سرمایه گذاری عمومی

In this paper, we study how the interactions between central bank transparency and fiscal policy affect macroeconomic performance and volatility, in a framework where productivity-enhancing public investment could improve future growth potential. We analyze the effects of the central bank’s opacity (lack of transparency) according to the marginal effect of public investment by considering the Stackelberg equilibrium, where the government is the first mover and the central bank the follower. We show that the optimal choice of tax rate and public investment, when the public investment is highly productivity enhancing, eliminates the effects of distortionary taxation and fully counterbalance both the direct and the fiscal-disciplining effects of opacity, on the level and variability of inflation and the output gap. In the case where the public investment is not sufficiently productivity enhancing, opacity could still have some disciplining effects as in the benchmark model, which ignores the effects of public investment.

Over the past two decades, an increasing number of central banks have become more transparent about their objectives, procedures, rationales, models and data. This has stimulated intensive ongoing research about the effects of central bank transparency.2 Most economists agree that openness and communication with the public are crucial for the effectiveness of monetary policy, because they allow the private sector to improve expectations and hence to make better-informed decisions (Blinder, 1998). Counterexamples have been provided, with addition of distortions, where information disclosure reduces the ability of central banks to strategically use their private information, and therefore, greater transparency may not lead to welfare improvement (e.g., Sorensen, 1991, Faust and Svensson, 2001, Jensen, 2002, Grüner, 2002 and Morris and Shin, 2002).3 In effect, according to the second-best theory, the removal of one distortion may not always lead to a more efficient allocation when other distortions are present. Typical models on monetary policy transparency usually consider two players: the monetary authority and the private sector. Departing from this approach, several authors introduce monetary and fiscal policy interactions.4 In a framework where the government sets a distortionary tax rate, it was shown that uncertainty (or opacity) about the “political” preference parameter of the central bank, i.e., the relative weight assigned to inflation and output gap targets, could reduce average inflation as well as inflation and output variability (Hughes-Hallett and Viegi, 2003, Ciccarone et al., 2007 and Hefeker and Zimmer, forthcoming). Higher distortionary taxes necessary for financing higher public expenditure will induce a lower output gap and higher unemployment. Thus, the central bank increases the inflation rate and workers claim higher nominal wages. In terms of macroeconomic volatility, less central bank political transparency has a disciplining effect on the fiscal authority, which could dominate the direct effect of opacity when the government cares less about public expenditure and the central bank is quite populist, whilst the initial degree of central bank opacity is sufficiently high.5 However, the aforementioned studies do not distinguish the different components of public expenditure by separating public consumption (e.g., public sector wages and current public spending on goods) from public investment (e.g., infrastructure, health and education). Substantial theoretical and empirical research has been directed towards identifying the components of public expenditure that have significant effects on economic growth since the seminal contribution of Barro (1990). Through the introduction of both public capital (infrastructures) and public services (education) as inputs in the production of final goods, theoretical models suggested that public investment generates higher growth in the long run through raising private sector productivity (e.g., Futagami et al., 1993, Cashin, 1995, Glomm and Ravikumar, 1997, Ghosh and Roy, 2004, Hassler et al., 2007, Klein et al., 2008 and Azzimonti et al., 2009). In addition, empirical studies confirm the positive impact of public investment on productivity and output (e.g., Aschauer, 1989, Morrison and Schwartz, 1996, Pereira, 2000 and Mittnik and Neumann, 2001). Usually, the frameworks used in theoretical studies on public investment ignore the effects due to monetary and fiscal interactions. Cavalcanti Ferreira (1999) examined the interaction between public investment and inflation tax and found that the distortionary effect of inflation tax is compensated by the productive effect of public expenditure. Ismihan and Ozkan (2004) consider the relationship between central bank independence and productivity-enhancing public investment, and argue that, although central bank independence delivers lower inflation in the short term, it may reduce the scope for productivity-enhancing public investment and so harm future growth potential. Ismihan and Ozkan (2007) extended the previous model by taking into account the issues of public debt, and found that, under alternative fiscal rules (balanced-budget rule, capital borrowing rule), the contribution of public investment to future output plays a key role in determining its effects on macroeconomic performance. The distinction between public consumption and public investment could allow us to introduce in the literature of central bank transparency the effects of public investment on the aggregate supply. These effects could correct the distortionary effects of taxation and therefore interact with central bank transparency. For this purpose, we re-examine in this paper the interaction between central bank political transparency and fiscal policies in a two-period model, similar to Ismihan and Ozkan (2004), where the public investment is productivity enhancing and could compensate, partially or totally, the distortions generated by the taxes on revenue. The aim of the paper is to investigate to what extent the disciplining effect of opacity could be generalized to a framework where the government has more than one policy instrument. The paper is organized as follows. The next section presents the model. Section 3 presents the benchmark equilibrium where there is no productivity-enhancing public investment. Section 4 examines how the inclusion of public investment affects the effects of opacity according to the marginal effect of public investment on the aggregate supply. Section 5 summarizes our findings.

In a two-period model where productivity-enhancing public investment could improve future growth potential, we have examined the interaction between central bank transparency and fiscal policy and the resulting effects on macroeconomic performance and volatility. In the framework of the Stackelberg equilibrium, where the government is the first mover and the central bank the follower, we have shown that the effects of the central bank’s opacity (or lack of transparency) depend on the marginal effect of public investment. In the benchmark case (without productivity-enhancing public investment), the central bank’s opacity reduces the inflation rate, tax rate, public consumption and output distortions when the direct effect of opacity is dominated by the fiscal-disciplining effect of opacity. The latter condition is verified when the weight assigned to public consumption is low enough, the central bank is quite populist, and the initial degree of opacity is high enough. We have demonstrated that the government’s optimal choice of tax rate and public investment, when the public investment is highly productivity-enhancing, eliminates the effects of distortionary taxation and fully counterbalances both the direct and the fiscal-disciplining effects of opacity at the level and variability of inflation and output gap. However, in the intermediate cases, where the public investment is insufficiently or relatively productivity enhancing, the effects of opacity would be between the neutralization results and these predicted by the benchmark model. Even though the effects of opacity on the macroeconomic performance and volatility could be weakened by the productivity-enhancing effects of public investment, the implications of the benchmark case, regarding the effects of opacity, will be valid again. Finally, the present study can be extended in different directions by considering, for example, a Nash game structure, a budget constraint including seigniorage revenue and public debt used to finance the public investment, and/or the contemporary effect of public investment. Some of these extensions could affect significantly the benchmark equilibrium and/or the transmission mechanism of monetary and fiscal policies in the full model. However, we conjecture that our findings concerning the neutralization of the effects of central bank opacity when the public investment is sufficiently productivity enhancing are robust to these alternative assumptions.