Accountability, Credibility, Transparency, and Stabilization Policy in the Eurosystem

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Abstract
This chapter examines the relationship between accountability and credibility and discusses factors that might affect this trade-off. It also examines how transparency-enhancing measures interact with accountability and credibility, how they alter the trade-off between those two attributes, and the implications for the institutional structure of the European Central Bank (ECB). It then asks whether it is a good idea to publish central bank forecasts about the economy as soon as they are formed. This question is examined in the presence of a neo-Keynesian transmission mechanism in which the ex ante real rate affects the output gap and the latter affects subsequent inflation. Here, the objectives of society include, in addition to price stability and stabilization policy, interest rate smoothing.

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