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Central Bank Accountability and Transparency: Theory and Some Evidence

Author

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  • Sylvester C. W. Eijffinger
  • Marco Hoeberichts

Abstract

The first part of this paper outlines the concept of democratic accountability of central banks, and compares the legal accountability of the European Central Bank (ECB) with some other central banks (Bank of Canada, Bank of Japan, Bank of England and the Federal Reserve System). The second part presents a theory of central bank accountability. Two aspects of accountability are considered: transparency of actual monetary policy and the question of who bears final responsibility for monetary policy. The paper shows that accountability through transparency leads to a lower expected rate of inflation and less stabilization of supply shocks. Accountability through shifting final responsibility in the direction of the government leads to higher inflationary expectations and more stabilization of supply shocks.

Suggested Citation

  • Sylvester C. W. Eijffinger & Marco Hoeberichts, 2002. "Central Bank Accountability and Transparency: Theory and Some Evidence," International Finance, Wiley Blackwell, vol. 5(1), pages 73-96.
    • Handle: RePEc:bla:intfin:v:5:y:2002:i:1:p:73-96
    DOI: 10.1111/1468-2362.00088
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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