Central bank transparency is essential to democratic accountability. Central bankers often limit it – fearing its stifling effect on frank debate. Yet transparency may induce monetary policy committee members to be better prepared. This column discusses evidence showing that the ‘better prepared’ effect is important empirically. Exploiting a natural experiment in the Fed Open Market Committee in 1993 – and using computational linguistics tools to measure the impact of transparency on deliberation – the research shows that the net effect is a more informative deliberation process.
The world’s major central banks display significant differences in transparency. The European Central Bank currently publishes no direct information on its internal policy debates, and will only release minutes with a 30-year lag. The Bank of England releases minutes soon after meetings, but withholds transcripts.