<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Exchange rate volatility has emerged as a significant challenge for Asian emerging markets since the adoption of the liberalization process. This study examines the influence of central bank transparency on exchange rate volatility using a sample of ten important Asian emerging markets. The study uses a fixed effect regression model covering the Asian financial crisis, global financial crisis, banking crisis, and taper tantrum episodes. Results show that an increase in central bank transparency has a stabilizing effect on exchange rate volatility, and this effect remains even after controlling for various internal and external factors. The uncertainty of US monetary policy increases exchange rate volatility, while US economic policy uncertainty contributes only during the global financial crisis. Interestingly, central bank transparency buffers the effects of the global financial crisis, indicating that it plays a facilitating role in maintaining financial stability. Studies that examine the role of central bank transparency in curbing exchange rate volatility, which is a crucial issue in these markets, are rare in emerging markets’ context. This research offers interesting findings by using a variety of robustness checks.</p>
</abstract>

Exchange rate volatility has emerged as a significant challenge for Asian emerging markets since the adoption of the liberalization process. This study examines the influence of central bank transparency on exchange rate volatility using a sample of ten important Asian emerging markets. The study uses a fixed effect regression model covering the Asian financial crisis, global financial crisis, banking crisis, and taper tantrum episodes. Results show that an increase in central bank transparency has a stabilizing effect on exchange rate volatility, and this effect remains even after controlling for various internal and external factors. The uncertainty of US monetary policy increases exchange rate volatility, while US economic policy uncertainty contributes only during the global financial crisis. Interestingly, central bank transparency buffers the effects of the global financial crisis, indicating that it plays a facilitating role in maintaining financial stability. Studies that examine the role of central bank transparency in curbing exchange rate volatility, which is a crucial issue in these markets, are rare in emerging markets’ context. This research offers interesting findings by using a variety of robustness checks.

Does Central Bank Transparency Deter the Exchange Rate Volatility? New Evidence from Asian Emerging Markets

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

Exchange rate volatility has emerged as a significant challenge for Asian emerging markets since the adoption of the liberalization process. This study...

Does Central Bank Transparency Deter the Exchange Rate Volatility? New Evidence from Asian Emerging Markets

Published Online: May 24, 2023

Page range: 133 - 163

Received: Apr 06, 2022

Accepted: Oct 27, 2022

DOI: https://doi.org/10.2478/jcbtp-2023-0017

Keywords
Central Bank Transparency, Exchange Rate Volatility, Monetary Policy, Emerging Markets

© 2023 Muhammad Aftab et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Does Central Bank Transparency Deter the Exchange Rate Volatility? New Evidence from Asian Emerging Markets

Published Online: May 24, 2023

Page range: 133 - 163

Received: Apr 06, 2022

Accepted: Oct 27, 2022

DOI: https://doi.org/10.2478/jcbtp-2023-0017

KeywordsCentral Bank Transparency, Exchange Rate Volatility, Monetary Policy, Emerging Markets

© 2023 Muhammad Aftab et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Central Bank Transparency, Exchange Rate Volatility, Monetary Policy, Emerging Markets