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By contrast, an environment in which the predictability of interest rate movements and their relation to key macroeconomic developments is well understood supports correct price formation in financial markets, contributes to the efficient allocation of funds, and reduces uncertainty concerning future interest rates. In such an environment, firms can improve their risk management and achieve better incentives to invest. How the ECB addresses its audience Let me turn to how the Governing Council of the ECB explains its monetary policy decisions to the public. Our communications aim to enhance the effectiveness of monetary policy. In this respect, the Governing Council fully subscribes to the basic principles of modern central bank communication described earlier. A high degree of transparency vis-à-vis our monetary policy has helped the public to hold the Governing Council accountable for its policy  2  See Kahnemann, D. (2003), “Maps of Bounded Rationality: Psychology for Behavioural Economics”, American Economic Review, Vol. 93(5), pp. 1449-1475, and Lohmann, S. (2003), “Why do institutions matter? An audience-cost theory of institutional commitment”, Governance, Vol. 16(1), pp. 95-110. 3  See Ehrmann, M. and M. Fratzscher (2007),”Social value of public information: testing the limits to transparency”, ECB Working Paper No. 821, and the literature quoted therein. 2  BIS Review 6/2008  decisions. Communication on monetary policy with a single voice is desirable and has been efficiently applied from the start of monetary union.