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(anticipated) economic shocks reflected in the policy instrument' (Cukierman (2000a,b) and Tarkka and Mayes (1999)).

Kuttner and Posen (2000) yet another eminent economists explains about the reduction of exchange rate volatility when there was a shift in the Federal Reserve's and the Bank of Japan's degrees of transparency.8 In addition to this, political pressures, increased accountability, facilitation of fiscal and monetary policy co-ordination, and improved internal organization of central bank analysis is yet another arguments in favor of transparency in monetary policy.9

Analytically, the three different regimes of transparency that is the least transparent, highly transparent and the extreme transparent are being distinguished by Faust and Svensson (2001). In the first regime, that is the least transparent, neither the employment goals nor the intentions of the central bank can be seen by the public. Inflation intentions of the central bank can be easily observed by using the second regime that is highly transparent. As a result of this increased transparency in inflation intentions there arises a lower inflation rate because the sensitivity of a central bank is increased which in-turn increases the reputation to its actions, making it more costly for the central bank to pursue a high-inflation policy. In the extreme transparency regime, that is the third according to the author, both the intentions of the central bank as well as the employment goals can be seen. The central banks reputation as well as its actions are no longer conveyed about the inflation bias. Higher inflation, inflation volatility and unemployment variability can be reached at as a result of inflationary bias.10

Yet another similar structure to Faust and Svensson (2001) was adopted by Jensen (2000) assuming that central bank is informed privately about its output target and that public's capacity to assume the inflation control error is greater. On comparison with Faust and Svensson (2001), who's main focus was on the future credibility effect of central bank, while Jensen (2000) focus was towards the marginal cost of inflation within the current period with the help of new Keynesian elements (staggered price-setting and monopolistic competition). Due to this increase in the transparency, there was an increase in the discipline and credibility to the reputational costs of deviations from the inflation target.

According to some of the eminent economist, transparency is not only the tool used for independent central banks to be held accountable, but it is often argued that the economic point of view too can be desirable from it. The effect of central bank being transparent is being immensely discussed by various policymakers and researchers. Although most of the literature tends to favor transparency of central bank, it's not the case, the debate still continuous whether or not central bank should be transparent or not. Most of the practical and observed research concludes that the transparency maintained by central bank previously were desirable from an economic point of view.

An important question to be asked is, whether central banks pushing toward more disclosure of information are beneficial or not. Indeed, there are a number of good reasons to it. First, it can be argued that banks from the early time itself are opaque institutions, and increase in disclosure might not change this