Central Bank Transparency

In the latest episode of the Andersen Institute for Finance and Economics Global Rewire podcast, Craig R. Torres and I bring together three former directors of the Federal Reserve Board Division of Monetary Affairs --The Brookings Institution Don Kohn, Vincent Reinhart, and Yale University William English -- to discuss threats to #fedindependence and how to enhance #transparency and #accountability. In an era marked by huge #uncertainty -- about the #inflation and #fiscal outlook, #trade and #immigration policies, #technology advancements, and geopolitical #fragmentation -- the independence and stability of #centralbanking are crucial for macroeconomic performance. The discussion focused on whether the current structure of the Federal Reserve System and the Federal Reserve Act provide enough political insulation to protect #fedindependence. We also debated how to improve #communication and #transparency, including by dropping the infamous "dot plots", providing greater clarity about the Fed's #balancesheet policies and framework, and providing more information about #financialstability objectives and tools. This episode is a must-listen for anyone passionate about the intersection of #economics, #monetarypolicy, and institutional #governance. This episode of Global Rewire van be found here: https://lnkd.in/eCZKXNWY https://lnkd.in/eA79CkT6

I am closing out another week with a piece reflecting on all the Fedspeak and communication policy. The progress from the Volcker Fed to the Powell Fed in explaining itself to the public is immense, but with progress comes growing pains. The volume of Fedspeak now is painful. Communication and transparency are essential at the Fed. The Humphrey-Hawkins hearings and the accompanying Monetary Policy Report are important. Testifying regularly before Congress in public is essential to the Fed’s accountability. The press conferences after every FOMC meeting are also important. The Chair expands on the FOMC’s thinking and answers questions from journalists who write it up for regular people. The Chair channeling and explaining the FOMC is extremely helpful. On balance, the communication policy in the Powell Fed is a big step forward from the Volcker Fed. However, the current state of play threatens to undermine the Fed’s policy goals. Divergent views among Fed officials are healthy and to be expected; however, they have turned into a mess in public and do not inspire confidence. https://lnkd.in/e9Ub_dKm

Let me commend the Central Bank of Nigeria (CBN) for re-introducing the publication of key economic reports. When the apex bank abandoned this tradition in 2016, I was against it. You do not balance your bank account by asking for a thinner chequebook. So, there was just no reason why the CBN stopped those publications. Why? If you do not have the data, everything becomes a guesswork. But with data, you will even know what is working and not working. I commend the central bank for restoring this tradition. Now to the professors, analysts, citizens, etc, this is the moment we have been asking for: with the veil lifted, we can get insights on how the apex bank is thinking over things, and possibly, we can constructively offer suggestions. Study those reports, and test CBN policies on welfare gains and losses, assessing how projections turn out at the end of the policy implementations. CBN: there are many economics professors in our universities: task them to assist. In other words, do not make it wholly internal where only CBN workers will churn out the publications. We want a balanced viewpoint, devoid of any political agenda, and supported by data https://lnkd.in/ecSn6FNe