transparency and accountability of central banks

8/8/2019 Transparency and Accountability of Central Banks

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Reported by:

Karl Mark DeocampoSPCT

Financial Management 2

Beverly Emperado


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Central banks operate in different historical,cultural, political and institutional

environments.independent central bank may beindependent but be constrained in the goalswhich have been set for it:

to maintain price stabilitymaintaining the stability of the financial

systemenhancing employment

or facilitating economic growth


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Traditionally, central banks had areputation for secrecy and mystery


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A central bank is transparent when

it provides at all times sufficient

information for the public tounderstand the policy system,

to check whether the banks actionsmatch the system and to pass judgmenton its performance.


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an environment in whichthe objectives of policy

its legal, institutional and economicframeworkpolicy decisions and their basis

data and information related tomonetary and financial policies andthe terms of agenciesaccountability ---

are provided to the public in acomprehensive, accessible andtimely manner.


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The reasons for central banktransparency

2 main reasons to promote the transparency of centralbanks:

First, the effectiveness of monetary and financial policiescan be strengthened if the goals and instruments of thecentral bank policy are known to the public and if theauthorities can make a credible commitment to meeting

them.


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S econd, the democratic accountability of central banks isanother reason to promote transparency.


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various aspects of transparencyvarious aspects of transparency

Transparency of monetary policy can

be defined as the extent to which centralbanks disclose information related to thepolicy-making process.

1. Political transparency refers toopenness about policy objectives.statement of the formal objectives of monetary policy


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2 . E conomic transparency focuses onthe economic information that is used formonetary policyeconomic data the central bank usesthe policy models it employs to constructeconomic forecasts or evaluate the impactof its decisions

3. Procedural transparency is about theway monetary policy decisions are taken.

how the policy decision was reached,which is achieved by the release of minutesand voting records


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y 4 . Policy transparency means a promptannouncement of policy decisions

it includes an explanation of the decisionand a policy inclination or indication of likelyfuture policy actions.

5 . Operational transparency concerns theimplementation of the central banks policyactions.I t involves a discussion of control errors inachieving the operating targets of monetarypolicy and unexpected disturbances thataffect the transmission of monetary policy.


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the Howthe Howof transparencyof transparency

There are a variety of means and methods of communicating with the public on the roles,policies, decisions, performance and operations of the central bank.


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M eans and methods of communication by theM eans and methods of communication by thecentral bank central bank - -

There are a variety of means and methods of communicating withthe public on the roles, policies, decisions, performance andoperations of the central bank.

y through legislation or regulationy written reports,y press releases,y speeches and appearances by officials of the

central bank,y official publications,y bulletins and the annual reporty central bank websites


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y In the case of a decision by an individual, a statement may be issued,

y while if the decision taken is the result ofnegotiations by a committee, it might be more

appropriate to issue minutes of that committeemeeting , expressing the different views ofcommittee members

What is important is that the information be

readily accessible to the public at large


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A ccountability definedy A ccountability has been defined as a mechanism, existing

between holders of delegated power and those who havethe formal power to replace them

y A ccountability implies the obligation

to give an account, that is to provide full informationabout and explain ones actions

and to respond to concerns about ones action


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All public entities need to beaccountable, both for achieving

their objectives and for the use of

the resources which are entrusted to them


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Accountability can be regarded as a form

of checks and balances in a system of central bank independenceaccountability requires transparency aseffective scrutiny implies effectiveaccess to information


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transparency and accountability of central banks

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