Central bank transparency and market reaction in Brazil, Chile, and Colombia

Central banks of Brazil, Chile, and Colombia in the late 1990s pledged transparency in their monetary policy decisions. Univariate tests show improvements in the forecasts of monetary policy actions in Brazil and Colombia but not in Chile. Multivariate tests examining the response of market interest rates to central bank announcements show transparency efforts lowered monetary policy news and macroeconomic news in Brazil and only partially in Chile and Colombia. Transparency efforts are effective when accuracy of forecasts improves and variability is reduced. Finally, both short-and long-term rates are shown to be impacted by monetary policy news and macroeconomic news. (C) 2021 Elsevier B.V. All rights reserved.