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A New Measure of Central Bank Transparency and Implications for the Effectiveness of Monetary Policy

Author

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  • Miguel Acosta

    (Federal Reserve Board)

Abstract

Transparency has been posited as a channel through which monetary policy is made more effective. However, empirical studies of this question and other questions concerning the role of transparency have lacked access to a time-varying highfrequency measure of transparency. This paper presents a new measure of the transparency of Federal Reserve deliberations, derived from the documents that the Fed uses to record and summarize each of its meetings. The measure—the similarity of the minutes and transcripts of each Federal Open Market Committee (FOMC) meeting—is largely, though not entirely, shaped by FOMC leadership. Monetary policy shocks have about a 40 percent larger effect on nominal and real interest rates when the prevailing level of transparency is high, suggesting an important role for transparency in determining the efficacy of monetary policy. These effects are primarily driven by transparency about monetary policy strategies conditional on the state of the economy.

Suggested Citation

  • Miguel Acosta, 2023. "A New Measure of Central Bank Transparency and Implications for the Effectiveness of Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 19(3), pages 49-97, August.
    • Handle: RePEc:ijc:ijcjou:y:2023:q:3:a:2
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    References listed on IDEAS

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    1. EllenE. Meade & David Stasavage, 2008. "Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve," Economic Journal, Royal Economic Society, vol. 118(528), pages 695-717, April.
    2. Husted, Lucas & Rogers, John & Sun, Bo, 2020. "Monetary policy uncertainty," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 20-36.
    3. Thomas Lustenberger & Enzo Rossi, 2020. "Does Central Bank Transparency and Communication Affect Financial and Macroeconomic Forecasts?," International Journal of Central Banking, International Journal of Central Banking, vol. 16(2), pages 153-201, March.
    4. Geraats, Petra M., 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series qt0hw7h7cp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    5. Anna Naszodi & Csaba Csavas & Daniel Felcser, 2016. "Which Aspects of Central Bank Transparency Matter? A Comprehensive Analysis of the Effect of Transparency of Survey Forecasts," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 147-192, December.
    6. Ellen E. Meade, 2005. "The FOMC: preferences, voting, and consensus," Review, Federal Reserve Bank of St. Louis, vol. 87(Mar), pages 93-101.
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    Citations

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    Cited by:

    1. Aliaksandr Amialchuk & Ayse Sapci & Onur Sapci, 2026. "The Carbon Footprint of U.S. Monetary Policy," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 52(1), pages 179-208, January.
    2. Ambrocio, Gene & Haavio, Markus & McClung, Nigel, 2024. "Monetary policy announcements and sacrifice ratios," Bank of Finland Research Discussion Papers 12/2024, Bank of Finland.
    3. Donato Masciandaro & Oana Peia & Davide Romelli, 2024. "Central bank communication and social media: From silence to Twitter," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 365-388, April.
    4. Jean-Charles Bricongne & Baptiste Meunier & Raquel Caldeira, 2024. "Should Central Banks Care About Text Mining? A Literature Review," Working papers 950, Banque de France.
    5. You Li & Weiqiang Tan & Daifei Yao & Jian Zhang, 2026. "Do Households React to Monetary Policy?," Management Science, INFORMS, vol. 72(5), pages 4517-4535, May.
    6. Daniel Aromí & Daniel Heymann, 2024. "Talk to Fed: a Big Dive into FOMC Transcripts," Working Papers 323, Red Nacional de Investigadores en Economía (RedNIE).
    7. Makram El-Shagi & Florian Gerth & Paul Lukuliko Philemon, 2026. "Rules vs. Discretion and the Role of the Central Bank," CFDS Discussion Paper Series 2026/2, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    8. Kanelis, Dimitrios & Kranzmann, Lars H. & Siklos, Pierre L., 2025. "The financial instability - Monetary policy nexus: Evidence from the FOMC minutes," Discussion Papers 13/2025, Deutsche Bundesbank.
    9. Rubén Fernández-Fuertes, 2025. "Monetary Policy Shocks: A New Hope. Large Language Models and Central Bank Communication," BAFFI CAREFIN Working Papers 25257, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    10. Shantanu Banerjee & Paul Cordova & Michiel De Pooter & Olesya V. Grishchenko, 2025. "Gauging the Sentiment of Federal Open Market Committee Communications through the Eyes of the Financial Press," Finance and Economics Discussion Series 2025-048, Board of Governors of the Federal Reserve System (U.S.).
    11. Aromí J. Daniel & Heymann Daniel, 2024. "Synthetic surveys of monetary policymakers: perceptions, narratives and transparency," Asociación Argentina de Economía Política: Working Papers 4707, Asociación Argentina de Economía Política.
    12. Philip N. Jefferson, 2024. "Communicating about Monetary Policy: A speech at Central Bank Communications: Theory and Practice,” a conference hosted by the Federal Reserve Bank of Cleveland, Cleveland, Ohio., May 13, 2024," Speech 98225, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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