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Essays on central bank transparency, accountability and reputation

Lisi, Giulio (2020) Essays on central bank transparency, accountability and reputation. PhD thesis, London School of Economics and Political Science.

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The dissertation investigates determinants and effects of central bank transparency, particularly with respect to the role of communication in promoting the political accountability of monetary authorities. There has been much debate in both political science and economics concerning the desirability and effectiveness of communication within public organisations; however, the link among policy delegation, transparency and accountability remains little understood. The thesis examines this topic looking at different aspects of central bank transparency and how it interacts with the political environment in which monetary authorities operate. In Chapter 2, I study the impact of legislative oversight on the transparency of the Federal Open Market Committee (FOMC). I develop a game-theoretical argument showing how, under reasonable assumptions, a monetary committee should prefer to communicate to political principals to signal competence rather than remaining silent; in this case, disclosures should also increase with political attention. Patterns of communication and transparency within the FOMC strongly support this expectation. Using methods from computational linguistics and features of parliamentary oversight of the Fed in US Congress, I find that the committee discloses additional information in its minutes when the legislative scrutiny of its decisions is likely to increase. In doing so, the study provides empirical evidence of a direct link between transparency and monetary committees’ political accountability. Chapter 3 (co-authored Cheryl Schonhardt-Bailey and James Sanders) examines dynamics of legislative oversight of economic policy within the UK parliament. Using several automated content analysis methods, the paper finds consistent differences in deliberative styles between monetary and fiscal policy, as well as across chambers (Commons, Lords). Parliamentarians appear more willing to engage in reciprocal exchange of arguments during monetary policy oversight that in the context of fiscal policy hearings. The paper also suggests some degree of cross-partisan agreement in challenging the officials of the Bank of England on issues related to governance and transparency, reinforcing the idea that these aspects of policy matter for accountability. Chapter 4 investigates a different dimension of communication, namely the relationship between transparency and independence in promoting the credibility of monetary authorities. In the study, I build on a Barro-Gordon framework to show that communication and central bank independence should be considered complementary policy instruments. I then test this argument using panel data for 95 countries in the period from 1998 to 2010. In line with expectations, I find that higher central bank transparency is associated with lower inflation, and that this effect is stronger for high levels of independence. Monetary delegation or transparency alone appear not to have a significant impact on prices, suggesting that the two policies interact.

Item Type: Thesis (PhD)
Additional Information: © 2020 Giulio Lisi
Library of Congress subject classification: H Social Sciences > HG Finance
J Political Science > JA Political science (General)
Sets: Departments > Government
Supervisor: Schonhardt-Bailey, Cheryl

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