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The hidden cost of transparency pledges

Harmon, Derek (2020) The hidden cost of transparency pledges. LSE Business Review (18 Dec 2020). Blog Entry.

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Leaders often make pledges of transparency to signal honesty and instil confidence. But what if they instead are sowing seeds of doubt? In a recent paper examining Federal Reserve communications, that’s exactly what I found. The study analyses seventeen years of speeches by the Fed chair, and looks at the effect these speeches have on the VIX Volatility Index, or “fear gauge.” What I show is that the more the chair tried to calm the market by being transparent about their objectives and policy framework, the more volatile the market became.

Item Type: Online resource (Blog Entry)
Official URL:
Additional Information: © 2020 The Author
Divisions: LSE
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited: 26 Jan 2021 10:36
Last Modified: 16 May 2024 09:59

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