Central banks communicating more with public: Global survey

NEW DELHI: The central banks globally are stepping up communications with the masses to bring in more transparency and better public understanding of their policy measures, a new survey has found.

"Central banks have made determined efforts in recent years to improve the way they communicate with the public. They now provide more and better focused information on monetary policy and do so on a timelier basis," as per the survey conducted by the Bank for International Settlements (BIS).

For years, the complexity involved with the monetary policy and other measures undertaken by the central banks are said to have been a key hindrance in the understanding of the issues among the public, consequent to which the real impact of the initiatives tend to get delayed for the market.

"Considering the complexity of communicating monetary policy, the strategies adopted by central banks in recent years are perceived to be bearing fruit," the survey found.

"The direction and magnitude of policy decisions are seen by central banks as largely anticipated by market participants; this should help to reduce the overall economic costs of adjusting to changes in policy settings," it added.

The main reasons cited by central banks for improving communications are to ensure better accountability and enhance public's understanding of the objectives of policy and the decision-making process.

However, the survey said, there are certain factors which deter central banks from disclosing more information.

"Full transparency may not always be optimal because it may not be desirable to reveal information about individual financial institutions or about disagreements within the policymaking committee," it added.

The disclosure of "private" central bank information about liquidity or solvency problems in parts of the financial system could easily trigger a bank run.

"Revealing open dissension within the policymaking board could generate additional noise, to the detriment of financial market stability," the BIS report noted.

It added the central banks also make significant additional efforts to provide regular information outside the policy announcement window concerning the evolution of the economy.

This is done either through official publications or through public appearances by senior officials, it added.

The survey said transparency is greater in countries with a higher level of economic development and deeper financial markets.

"Larger and well diversified economies may be less constrained in their policymaking frameworks than small and open economies," the survey revealed.