Bolstering central bank transparency and accountability

Bank of England (credit: Robert Bye/Unsplash)

Central banks have become dramatically more transparent in recent decades. More transparent central bank communications make it easier for the public to infer the central bank’s intentions and align private sector expectations, thereby making monetary policy more effective in stabilising financial markets and the economy more broadly, while also increasing public accountability.

Petra Geraats has made significant contributions to reviews of central bank transparency practices at the Bank of England (2014) and at the Central Bank of Chile (2019), which resulted in substantial reforms of the central banks’ communication strategies.

Geraats’s research has shown how greater transparency can improve macroeconomic outcomes. The publication of central bank forecasts allows central bankers to build reputation through their policy actions – instead of through policy outcomes, which take much longer to materialise. It gives central banks greater flexibility to engage in macroeconomic stabilisation.

She served (2019–2020) on a High-Level Advisory Panel to guide the development of the International Monetary Fund (IMF)’s new Central Bank Transparency Code, which is now the standard for all IMF members, enabling them to improve their policy effectiveness and accountability.

“Your [Geraats’] many contributions… allowed us to incorporate valuable insights from your extensive central bank experience. They allowed us to better address a range of complex issues, including how transparency can improve the effectiveness of monetary and macroprudential policy, the delicate balance between confidentiality and transparency, and key aspects of central bank governance, organization, and autonomy.”

– Managing Director, International Monetary Fund