آیا نوسانات بازار سهام شفافیت بانک مرکزی را تحت تاثیر قرار می دهد ؟

This paper addresses the issue of impacts of central banks’ transparency on stock market volatility. Using a simple theoretical macroeconomic model, we analytically find a negative link between stock prices volatility and central bank transparency. By applying panel data analysis on a set of 40 countries from 1998 to 2005, sufficient evidence for this negative relationship is provided, using three different measures of stock market volatility. Therefore, moving towards monetary policy transparency is recommended as stock market volatility can be reduced considerably, implying significant benefits for financial stability.

The conduct of monetary policy has moved during the last two decades to a new paradigm, which gives accent to central banks’ independence and transparency. Recently, Klomp and de Haan (2009) have argued that central bank independence (CBI) may not only be beneficial for reaching the objective of price stability, but also for maintaining financial stability. In effect, as central banks became independent, being transparent gained importance based on accountability arguments. Moreover, since the pioneer work of Cukierman and Meltzer (1986), a large body of literature on the economic desirability of central bank transparency has been developed, mostly for the case of developed countries and limited to the interaction between monetary authorities and private agents.1 Most economists are instinctually of the view that more information is better than less and hence agree that openness and communication with the public are crucial for the effectiveness of monetary policy in allowing the private sector and financial operators to improve expectations and therefore their decisions (Blinder, 1998, Van der Cruijsen and Demertzis, 2007 and Crowe and Meade, 2008).2 Among studies on the effects of transparency on macroeconomic variables, Chortareas et al. (2002) indicate that the disclosure of inflation forecasts reduces inflation, but is not necessarily associated with higher output volatility. Demertzis and Hughes-Hallet (2007) have found that greater transparency reduces inflation volatility but has a less clear effect on output volatility and no effects on the average level of inflation and output. The analysis of Dincer and Eichengreen (2007) suggests broadly favourable but relatively weak impacts on inflation and output volatility. Theoretical research on the effects of central bank transparency on financial markets yields mixed results. On the one hand, Cukierman (2001), Geraats (2006) and Rhee and Turdaliev (2013), among others, argue that the opaque regime dominates the transparent regime. On the other hand, Laskar (2010), using an explicit way to model the private sector's behaviour, shows that the transparency regime prevails. Along the same line, Eijffinger et al. (2006) show that greater transparency should enhance central bank credibility, flexibility and reputation. These effects of transparency should influence the level of interest rates. In particular, enhanced flexibility would allow a reduction in policy and short-term interest rates without increasing long-term nominal interest rates. In addition, improved reputation would reduce inflation expectations and thereby long-term nominal interest rates. Furthermore, the role of interest rates is crucial in the equity valuation, implying a link between equity market and central bank transparency. A large strand of the empirical literature examines the effects that monetary policy actions can have on financial assets. As far as the foreign exchange market is concerned, Evans and Speight (2010) and Rosa (2011) focusing on developed countries show that the surprise component part of monetary policy statements is accountable for most of the explainable variation of volatility in exchange rate returns in response to monetary policy. According to Fratzscher (2006) for G3 countries, central bank communication can reduce exchange rate volatility and uncertainty whereas actual interventions tend to raise it. Gnabo et al. (2009) argued that oral intervention by Bank of Japan increases exchange rate volatility while statements aimed at confirming or providing some details about the operation the day it was carried out tend to decrease the probability of false reports. In cases of emerging economies evidence that verbal interventions by central banks tend to reduce exchange rate volatility have been provided among others by Égert (2007), Fišer and Horvath (2010), Goyal and Arora (2012). Recently, Égert and Kočenda (2014), argued that the responsiveness to central bank verbal interventions of the exchange rates of three Central and Eastern European currencies against the euro becomes important only during the crisis period. By examining the impact of monetary policy announcements on bond return volatility, de Goeij and Marquering (2006), Ranaldo and Rossi (2010), show that the bond market is highly responsive to central bank communication. Additionally, studies analysing the role of transparency concerning the reaction of bond markets to news related to monetary policy show that greater transparency (particularly political, policy and economic)3 improves the predictability of central banks’ decisions. In this line, Neuenkirch (2012) provides evidence that transparency reduces the bias in money market expectations and dampens their variation. Particular attention has been given by academic research on the identification of monetary policy's effects on equities.4 One of the most important results of the relevant literature is that only unexpected monetary policy changes have significant negative effects on stock returns. However, this effect is not uniform across sectors and firms (Ehrmann and Fratzscher, 2004 and Gregoriou et al., 2009). Another interesting finding is that information communicated through monetary policy statements has important business cycle-dependent implications for stock prices (Kurov, 2012). Moreover, monetary policy surprises have large effects on stock returns’ volatility (Bomfim, 2003 and Konrad, 2009).5 Therefore, the presence of more transparent central banks implies fewer unexpected monetary policy actions. More recent studies are focused on intraday data. According to Reeves and Sawicki (2007), the publication of the inflation report reduces the volatility of the stock market index FTSE 100. Lunde and Zebedee (2009) show that stock market volatility tends to be relatively lower on days before and higher on days after monetary policy decisions. Chuliá et al. (2010) find that the stock market responds differently to positive and negative target rate surprises. Hussain's (2011) results indicate that the significant influence of monetary policy decisions generally exerts immediate and significant influence on stock index returns and volatilities. While the above studies are somehow related to our paper by testing the link between central bank transparency and stock market volatility, they do not provide an analytical solution to confirm this relationship. Furthermore, the empirical part employed so far in this context usually considers an event study, abstracting from international evidence provided by a panel data analysis. However, this latter analysis was usually used by the existing literature when considering the link between central bank transparency and inflation, output or the bond market. In this respect, this study contributes to the existing literature in two ways: (a) by developing a theoretical model which shows the link between stock market volatility and central bank transparency and (b) by providing, in an international context, empirical evidence for the effect of transparency on stock market volatility. Our findings imply that a high level of transparency can reduce three different measures of stock market volatility. An interesting policy implication is that a high level of central bank transparency can contribute to financial stability, which plays a crucial role in investment decisions. The remainder of the paper is structured as follows. Section 2 describes the main theoretical model developed, Section 3 presents the empirical analysis, and we conclude in the last section.

This paper examined the relationship between stock market volatility and central bank transparency. Our analytical setting implies a negative relationship between central bank transparency and stock market volatility. This theoretical relationship has been confirmed by our empirical analysis. By using panel data for 40 countries, we provide empirical evidence supporting our analytical proposition. Given that other factors positively affect the stock market volatility, such as the turnover ratio, the volatility of the effective exchange rate and that of short-term interest rates, an important implication is that this characteristic of the central bank, by lowering stock market volatility, seems to be essential for investment decisions. Moreover, high stock market capitalization and financial openness are important aspects for smooth stock market development. It is also important to mention that the increased level of transparency in monetary policymaking can enhance the traditional goal of financial stability, which was highlighted by the recent financial crisis. Therefore, moving towards monetary policy transparency is recommended as stock market volatility can be reduced considerably, implying significant benefits for financial stability. Regarding further research, it could be interesting to investigate the role of other central bank characteristics on investors’ behaviour in the stock markets.