Independence and Accountability
AbstractWhy have central banks become more accountable and transparent in recent years? This paper considers a set of analytical models of monetary policy institutions to shed light on this. One conclusion it reaches is that uncertainty - regarding the central bank's inflation preferences or about the underlying model of the world - can generate inflationary problems which transparency can help counteract. This offers one rationale for the current monetary policy framework in the UK. The paper also constructs a quantitative index of accountability. This suggests that transparency has been pursued most actively by central banks with little independence and a low accrued stock of credibility. Again, this chimes with UK experience. A shorter version of this paper is forthcoming in "Toward more effective Monetary Policy" - proceedings of the Seventh Internal Conference sponsored by the Bank of Japan's Institute for Monetary and Economic Studies.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 49.
Date of creation: Apr 1996
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