Thursday, April 11, 2013

Transparency in Central Banking (and in the sky :-)

Last week I was at the International Studies Association annual conference in San Francisco. I participated in a panel on the euro crisis, at which Matthias Kaelberer (Univ. of Memphis) presented a thought-provoking paper (available on the ISA conference website) arguing, inter alia, that the transparency of the ECB has made a valuable contribution to its political legitimacy (and that of the euro).

Some audience members disagreed, arguing instead that transparency was bad for legitimacy (national central banks have traditionally not been very transparent and yet quite legitimate; the appearance of indecision or disagreement within the bank will not increase people's faith in the institution) and for economic outcomes (probably because transparency makes it harder for banks to make unexpected moves and thus to affect the expectations of economic actors).

By coincidence, I read an interview today, on Bloomberg Businessweek's website, with the Dutch economist Petra Geraats, based in Cambridge. The interview (by Simon Kennedy) highlights her work on the economic benefits of central bank transparency. Her research indicates quite strongly that transparency is actually good for economic outcomes. Towards the end of the interview, the article provides some nice examples of how central banks are increasing their transparency. Interesting stuff.

Speaking of transparency: apparently Geraats is interested in astronomy, but the skies over Cambridge are insufficiently transparent (too cloudy), so her telescope remains "at her father’s home in the Dutch province of Lindbergh." From this, we can conclude two things:
1. The interview was by phone, and
2. the interviewer has no idea what provinces there are in the Netherlands
    (Geraats, must, of course, have said Limburg)