Transparency on financial stability not always optimal – Fed paper

Financial crisis

Under some conditions it may be optimal for central banks to avoid revealing too much information on the state of the credit cycle, new research published by the Federal Reserve finds.

David Arseneau studies the question of when a central bank can benefit from being better informed than the wider population. He finds that when financial stability vulnerabilities are “complex” – a non-linear crisis probability function – central banks can use macro-prudential policy to affect real economic

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