Independence and Accountability
Why 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.
|Date of creation:||Apr 1996|
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- Danny Quah & Shaun Vahey, 1995.
"Measuring Core Inflation,"
Bank of England working papers
31, Bank of England.
- Dotsey, Michael, 1987. "Monetary policy, secrecy, and federal funds rate behavior," Journal of Monetary Economics, Elsevier, vol. 20(3), pages 463-474, December.
- Joshua Aizenman & Jacob A. Frenkel, 1984.
"Optimal Wage Indexation, Foreign-Exchange Intervention and Monetary Policy,"
NBER Working Papers
1329, National Bureau of Economic Research, Inc.
- Aizenman, Joshua & Frenkel, Jacob A, 1985. "Optimal Wage Indexation, Foreign Exchange Intervention, and Monetary Policy," American Economic Review, American Economic Association, vol. 75(3), pages 402-23, June.
- Francis Breedon & Ian Twinn, 1995. "Valuation of underwriting agreements for UK rights issues: evidence from the traded option market," Bank of England working papers 39, Bank of England.
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