Which kind of transparency? : on the need for effective communication in monetary policy-making

In most of the existing academic literature the notion of transparency in monetary policy is defined in too simple terms to be of practical relevance. This paper suggests a conceptual framework, which distinguishes different - and potentially conflicting - aspects of transparency. When there are frictions in communication or imperfections in the processing of information "openness" in the release of information needs to be reconciled with the need for "clarity" in central bank communication. In this perspective transparency primarily hinges on a shared mode of interpretation ("common understanding") between the central bank and its audience.