Following the Warsh Review, the Bank of England plans to release its policy decisions, ‘enhanced’ meeting minutes and (once a quarter) the Inflation Report all at the same time. This column, which reports the views of the leading UK-based macroeconomists, reveals substantial support for the idea of simultaneously providing the different Monetary Policy Committee (MPC) documents. In order to make this possible, the Bank plans to change the structure of its MPC meetings. When the proposed change in the structure is taken into account, the panel is split on the desirability of the Bank's plans.
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 17 March 2015
Charles Goodhart, 02 March 2015
Following the Warsh Review, the recording, number, and timing of the Bank of England’s Monetary Policy Committee meetings will change. This column argues that the recording may make the decision meeting more formal and could inhibit debate, although the eight-year gap before publishing transcripts ameliorates this concern. Having fewer MPC meetings is a good thing, and reduces ‘noise’ around monetary policy. The revised meeting schedule will not add to transparency and raises the risk of leaks and ‘news shocks’.
Darrell Duffie, Piotr Dworczak, Haoxiang Zhu, 16 February 2015
Trillions of dollars’ worth of transactions depend on financial benchmarks such as LIBOR, but recent scandals have called their reliability into question. This column argues that reliable benchmarks reduce informational asymmetries between customers and dealers, thereby increasing the volume of socially beneficial trades. Indeed, the increase in trading volume may offset the reduction in profit margins, giving dealers who can coordinate an incentive to introduce benchmarks. The authors argue that benchmarks deserve strong and well-coordinated support by regulators around the world.
Barry Eichengreen, Petra Geraats, 06 January 2015
The Bank of England has been a beacon for openness and transparency. This column argues that proposed changes to its procedures will worsen transparency. The changes would make the policymaking process less efficient in the name of transparency. But transparency is not an end in itself. Rather, it is a tool for enhancing accountability and, just as importantly, advancing the ultimate goal of making monetary policy more efficient and effective.
Xavier Vives, 22 December 2014
Banking has recently proven much more fragile than expected. This column argues that the Basel III regulatory response overlooks the interactions between different kinds of prudential policies, and the link between prudential policy and competition policy. Capital and liquidity requirements are partially substitutable, so an increase in one requirement should generally be accompanied by a decrease in the other. Increased competitive pressure calls for tighter solvency requirements, whereas increased disclosure requirements or the introduction of public signals may require tighter liquidity requirements.
Francesco Pappadà, Yanos Zylberberg, 03 February 2014
Greece’s austerity package included an unprecedented increase in the VAT rate, but the resulting increase in revenue was much lower than expected. This column links this disappointing result to the ‘transparency response’ of firms to higher tax rates. In countries like Greece with poor tax monitoring, firms face a tradeoff when deciding whether to declare their activity. Transparency is a necessary condition for accessing external finance, but it also means having to pay tax. Improving credit conditions for small and medium-size Greek firms might shift this tradeoff in favour of transparency.
Tomaso Duso, Klaus Gugler, Florian Szücs, 26 January 2014
In 2004, European merger law was substantially revised, with the aim of achieving a ‘more economic approach’ to merger policy. This column discusses a recent empirical assessment of European merger cases before and after the reform. Post-reform, the outcomes of merger cases became more predictable, and the Commission prohibited fewer pro-competitive mergers. While there remains room for improvement in several aspects, the reform seems to have been successful in bringing European competition law closer to economic principles.
Rafael Doménech, Víctor Pérez-Díaz, 11 December 2013
Based on the report issued by a Committee of Experts, the Spanish Parliament will pass a new law that implements an innovative sustainability factor in the public pension system. This column argues that the proposal solves the problem of financial sustainability in the long run while opening a wider debate on the welfare system and growth under conditions of increased global competition.
Clemens Bonner, Iman van Lelyveld, Robert Zymek, 01 November 2013
What are the determinants of banks’ liquidity holdings and how are these reshaped by liquidity regulation? Based on a sample of 7,000 banks in 30 OECD countries, this column argues that banks’ liquidity buffers are determined by a combination of both bank- and country-specific variables. The presence of liquidity regulation substitutes for most of these determinants while complementing the role of size and institutions’ disclosure requirements. The complementary nature of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation.
Xavier Freixas, Christian Laux, 17 April 2012
Faith in market discipline has been shattered by the financial crisis. This column argues that the failure of market discipline has different roots. It points to a lack of transparency and efficiency, particularly when it is needed most. In order to rectify this, however, it is not enough to merely increase the provision and disclosure of information. Instead, transparency depends on how that information is interpreted and used.
Peter Tillmann, 23 February 2012
As the US Federal Reserve starts to increase the transparency of its decision-making process, including the release of economic forecasts and interest-rate projections, this column asks whether these projections reflect strategic motives that might make them less accurate and less useful to those wanting to predict monetary policy.
Ana De La O, Alberto Chong, Dean Karlan , Léonard Wantchékon, 23 January 2012
For democratic theorists, the notion that greater transparency improves accountability is axiomatic: when voters find out about political corruption, they punish the offending politicians by not voting for them again. But, the authors of CEPR DP8790 argue, many voters also respond to evidence of corruption by not voting at all – indicating that more transparency might not automatically result in a healthier democratic process.
Kateřina Šmídková, Jan Zapal, Roman Horváth, 13 November 2011
Does the publishing of voting records improve the transparency of monetary policy? This column argues voting records indeed contain informative power about future monetary policy but only if there is sufficient independence in voting across board members and if the signals about the optimal policy rate are noisy.
Anne Sibert, 15 September 2011
The European Central Bank was once known for its focus on price stability. Since the global economic crisis, however, its role has extended to saving banks and sovereign countries. This column argues that such a move has badly harmed the institution’s legitimacy – something that will damage both its policy effectiveness and confidence in the governing bodies of the EU as a whole.
Barry Eichengreen, 17 June 2010
Financial crises feed on uncertainty. This essay warns that the longer the Eurozone crisis is allowed to linger, the greater will be the damage. But Europe can take concrete actions to bring it to an end. It should make bank stress tests public, provide more clarity on its special purpose vehicle, move forward with restructuring Greece’s debt, and support growth through quantitative easing.
Helmut Reisen, Dilan Ölcer, 17 February 2009
The Extractive Industries Transparency Initiative has directed the international community’s attention to a sector that has traditionally been veiled in secrecy. But it has not been effective in producing change. Why have so many resource-rich countries failed to lower perceived corruption? This column points to low-quality information provided in reports and weak civil societies in resource-rich countries as possible explanations. Reforms and improvements are needed.
Carin van der Cruijsen, Sylvester Eijffinger, Lex Hoogduin, 12 August 2008
Transparency is the new trend in central banking, but it has both costs and benefits. This column discusses research aimed at identifying the optimal level of transparency. The results suggest that US and European central banks may be too transparent.
Christopher Crowe, Ellen Meade, 31 July 2008
Theories arguing that independent, transparent central banks fight inflation better are widely accepted, but the evidence backing them is surprisingly scarce. This column presents new empirical estimates suggesting a payoff to central bank independence and transparency.
Christopher Crowe, Ellen Meade, 27 July 2008
The European Central Bank is under fire from Nicholas Sarkozy. This column introduces a new set of measures of central bank independence and transparency, which shows that the ECB is markedly more transparent than the Eurozone members’ central banks were in the 1990s.
Ellen Meade, David Stasavage, 26 June 2008
Central banks are increasingly transparent but is the spotlight is stifling? Analysis of FOMC transcripts before and after Committee members knew that they would be published shows how transparency deadened the debate and reduced the number of challenges to Greenspan’s position.