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A new tool offers an opportunity for central banks to enhance their transparency and safeguard indepence
By Tobias Adrian, Jihad Alwazir, Ashraf Khan, Dmytro Solohub
March 23, 2023
In a significant move last month, the Bank of Canada became one among nearly two dozen central banks that now regularly disclose detled information about their monetary policy decisions. This decision comes agnst the backdrop of economic and financial instability which calls for greater transparency from policymakers.
As central banks hike interest rates in an effort to combat inflation, there's growing scrutiny from stakeholders. In some countries, policymakers are facing mounting pressure on their autonomy. To mntn public trust and protect indepence while also enhancing policy effectiveness amidst such challenges, monetary authorities must prioritize transparency and accountability.
In a January interview with Central Banking magazine, Stefan Ingves, the former governor of Sweden’s Riksbank who recently stepped down after 17 years in office, eloquently summarized this relationship: Indepence demands transparency, he sd. If you're indepent, it's vital that people can understand what you are doing. If you’re indepent and you tell the general public 'It's none of your business,' indepence will be taken away from you sooner or later.
Laws often include explicit provisions on transparency for monetary policy as evidenced by the IMF’s Central Bank Legislation Database.
The International Monetary Fund IMF has recognized the importance of transparency, actively promoting this practice through its initiatives. The Executive Board adopted a new Central Bank Transparency Code in 2020 - a comprehensive set of guidelines covering mandates, functions, and operations that forms the basis for periodic reviews conducted by the IMF on member countries' practices.
These reviews help central banks evaluate their current transparency measures while also improving accountability and detling performance agnst established mandates. They facilitate more effective communication between central banks and key stakeholders including lawmakers, investors, academics, and the public. This leads to better-informed decision-making as it helps them refine their communication strategies.
The pilot review process has yielded significant outcomes:
The Bank of Canada began publishing summaries of its Governing Council deliberations.
The Central Bank of Chile adopted a new transparency policy based on IMF recommations, launching an additional section on its website that provides further operational detls.
The Central Bank of Seychelles now publishes Monetary Policy Reports and the National Bank of the Republic of North Macedonia discloses audit and risk management specifics.
In Morocco, Seychelles, Uganda - these countries utilized review findings to enhance their communication effectiveness through developing strategic plans and strengthening internal communication units.
Each central bank is staffed by dedicated professionals who play a crucial role in facilitating transparency. The reviews thus serve as a catalyst for building more effective and customer-focused communication systems within these institutions.
As central banks face increasingly complex challenges, it's imperative that they improve their level of transparency because their indepence and policy effectiveness hang on the balance.
Looking ahead, future transparency assessments will be avlable to all IMF member countries as a voluntary resource designed to boost transparency and accountability. The Fund plans to compile a repository contning information from these reviews med at fostering peer learning among central banks worldwide. This new tool reinforce trust in monetary authorities, enhancing their credibility and effectiveness across the globe.
This article is reproduced from: https://www.imf.org/en/Blogs/Articles/2023/03/23/central-banks-must-enhance-transparency-to-build-trust
Please indicate when reprinting from: https://www.i477.com/foreign_exchange_RMB/Central_Banks_Transparency_Code_IMF.html
Central Banks Transparency Strategies Monetary Policy Independence Protection Enhanced Public Trust Mechanisms Central Bank Accountability Practices IMF Transparency Code Implementation Global Credibility in Financial Stability