Why is increased transparency in monetary and financial policies desirable?
Central bankers were once notorious for being inscrutable, as reflected in Alan Greenspan’s famous quip that “if you understood what I just said, you must not have heard me correctly.” Now, however, many central banks and financial agencies have begun to prize clarity in explaining their objectives and decisions to the public. Monetary and financial policies can be made more effective if the public knows and understands the goals and instruments of policy, and if central banks and financial agencies make a credible commitment to meeting them. Good governance also calls for central banks and financial agencies to be accountable, particularly where these agencies are granted a high degree of autonomy. In cases when conflicts might arise between or within government units (e.g., if the central bank or a financial agency acts as both owner and financial supervisor of a financial institution, or if the responsibilities for monetary and foreign exchange policy are shared), transparency in th
