edward robinson : central bank communications - evolution in theory and practice opening remarks by mr edward robinson, deputy managing director ( economic policy ) and chief economist of the monetary authority of singapore, at the imf high - level peer - to - peer forum on “ central bank communications in asean – 5 countries : from principles to practice ”, singapore, 4 december 2019. * * * 1. introduction may i extend warmest greetings and welcome to all visitors and overseas participants. mas is very pleased that the imf is organising this conference on a most pertinent topic in singapore. 2. monetary policy communications — from opacity to transparency since the 1990s, there has been a clear trend in central banking circles towards greater transparency. this marked a significant turnaround from previous decades that prized monetary policy - making as “ an arcane and esoteric art best practiced out of public view ”. 1 former boe governor montagu norman ( 1920 – 1944 ) reputedly had a personal motto of “ never explain, never excuse. ” the change has much to do with the growing recognition that monetary policy is essentially about managing expectations. the increasing adoption of inflation targeting also spurred advances on the transparency front, with its communication - heavy requirements of policy targets, forecasts and outlook. the shift towards greater transparency is generally held as desirable for two broad reasons. first, transparency can enhance the effectiveness of monetary policy. 2 by helping to anchor long - term inflation expectations, transparency improves policy efficacy and facilitates the overall pro - equilibrating tendencies of the economy. central bank communication increases the predictability of central bank actions. so, it raises the “ signal - to - noise ” ratio, which reduces uncertainty faced by private agents and strengthens the pass - through from communication to market expectations. second, transparency is a mechanism for democratic accountability, in a world of policy discretion and central bank independence. transparency makes it easier to judge whether a central bank is committed to its announced policy, and acts as a check on possible temptations to base policy on short - run or political considerations. in short, communication demystifies and democratises monetary policy. the empirical literature finds that better information about central bank actions can lead markets to do the central bank ’ s work for it. blinder et al. ( 2001 ) was an early study which found that the us bond market ’ s ability to forecast fed actions improved from around 1996 onwards, a few years after the fed started announcing policy changes and publishing minutes of its meetings.

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