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Third Conference on Money, Banking and Finance: Monetary Policy Design and Communication

In the last two decades there has been a substantial change in the attitude of most central banks toward transparency. The old view that central bankers should speak in an opaque and convoluted language has been replaced by a new one which regards transparency as mandatory. This change went hand in hand with the development of a rich theoretical and empirical literature on the role of communication as an integral part of the strategy of modern central banks.

Transparency is the flip side of the independence that most central banks have gained, as it is required for accountability. Yet, there might be costs associated with the communication of noisy information. Theoretical studies presented at the conference confirm that full and unfettered communication might not always be optimal, thereby probing the limits of transparency.

The lack of agreement in the theoretical literature about the optimal degree of information sharing has fuelled the interest in the empirical analysis. The evidence presented at the conference focused on the predictability of policy decisions, which greatly increased as central banks moved towards more open communication.

Nevertheless, there are no firm conclusions yet regarding the opportunity to explicitly announce the expected future path of the interest rates, the opportunity and the feasibility to communicate detailed information about the process underlying monetary policy decisions, especially when decisions are taken by a committee and, perhaps most importantly, regarding the ability of communication to improve the effectiveness of the monetary authority in achieving its final goals.

ORGANIZING COMMITTEE

Giuseppe Ferrero (Bank of Italy); Francesco Lippi (University of Sassari and CEPR); Athanasios Orphanides (Federal Reserve Board and CEPR); Massimo Sbracia (Bank of Italy); Daniele Terlizzese (Bank of Italy).

LOCAL CONTACT PERSON

Alessandra Piccinini - alessandra.piccinini@bancaditalia.it