Policy Seminar on a review of the Bank of England’s transparency practices

Monday, February 9, 2015
George Shultz Conference Room, Herbert Hoover Memorial Building

Kevin Warsh, David Brady, Michael Boskin, John Cochrane, John Cogan, Stephen Langlois, David Mauler, John Raisian, George Shultz, Alp Simsek, John Taylor

Kevin Warsh, distinguished visiting fellow at Stanford University’s Hoover Institution and lecturer at Stanford’s Graduate School of Business, discussed his recent experience in being appointed by the Bank of England to review its practices and procedures relating to transparency in monetary policy. 

Warsh began by sharing experiences from his tenure as a Federal Reserve governor that inform and provide context for his views on transparency. He emphasized the particular need for effective transparency in light of central banks’ expanding mandate and influence. In an effort to precisely define transparency in monetary policy, Warsh argued that the concept spans five categories: political—being open about policy objectives, economic being open about the data inputs and outputs used, procedural—being open about the decision-making process, policy—being open about the announcement and rationale of policy, and operational— being open about the implementation and transmission of policy. Warsh also contended that transparency itself is not inherently good or bad, but can serve as an important tool in achieving four objectives he coins as the “Big 4.” The “Big 4” include: 1) making sound policy decisions, 2) effectively communicating, 3) being accountable, and 4) keeping a fair and accurate historical record.

Concluding, Warsh voiced his concern over the contagious nature of US policy missteps and suggested that the Bank of England proposal might serve as a useful template for other central banks.

(Links to Warsh’s review and the Bank of England’s response are listed below: http://www.bankofengland.co.uk/publications/Documents/news/2014/warsh.pdf http://www.bankofengland.co.uk/publications/Pages/news/2014/168.aspx)