EMPIRICAL ANALYSIS OF FOREIGN EXCHANGE VOLATILITY AND RATIONAL EXPECTATIONS ON CENTRAL BANK TRANSPARENCY
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Abstract
Today the Central Bank actions are under a big scrutiny from economic agents and government. Thus, it has been raised the question of the reasonable level of regulator’s openness. Under risen volatility in the foreign exchange rate
and range of fi nancial variables it has openedthe question of rebuilding a current communication policy of monetary authority with the aim to maintain the confi dence of economic agents that supporting price stability is the prior task
of Central Bank. Also irrational behavior of agents can lead to failure of conducting monetary policy of Central Bank. Therefore, more magnitude of volatility in fi nancial variables evokes less transparent dealing of Central bank, while one
pursues monetary policy strategy. Th at is why in this paper empirical relationship between risen volatility magnitude, providing the implicit target, maintaining price stability target on a one hand and openness in economic, political, procedural, monetary and operational aspects of regulator transparency in an another will be considered and discussed.