, and analyses covering a wide variety of markets ”. in this background, perhaps this is a proper occasion to share with the distinguished gathering today some of my thoughts on dilemmas faced by central banks in their communication policies and the multiple effects of the media. this will be followed by a brief narration of initiatives taken by select central banks and then by a more detailed account of dissemination policies and practices of the reserve bank of india. central banks ’ dilemmas the functioning of the central banks has generally been considered highly secretive if not entirely to be an ivory tower. in fact, a book by william greider on the federal reserve published as recently as 1987 is titled “ secrets of the temple ”. the situation has changed, however. for instance, the european central bank ( ecb ) like most other central banks in the world, is laying greater emphasis on its communications policy, as acknowledged by mr. otmar issing about a year ago. in fact, mr. issing explained the communications problem in the context of “ euro ’ s external exchange rate ” and the rather mixed opinion of the ecb despite its success in its main task. it is clear that the approaches of central banks to communications have changed. what are the reasons for this change? traditionally, central banking policy formulation has been associated with an element of secrecy, and for good reasons, a central bank was considered to be an arm of government. furthermore, financial markets and entities were tightly regulated and functioned the way regulators would like them to behave. however, with financial deregulation and increasing cross border flows, the central banks of most countries have gained some degree of autonomy and with it a sense of accountability. hence, central banks do see some advantage in communicating in as transparent a manner as is appropriate, their policy intentions and operations. well informed market participants enable, though not assure, improved functioning of markets. of course, the policy maker cannot reveal policy cards as it is advisable to maintain an element of surprise or avoid anticipatory actions. yet, in all cases, either exante, or concurrent or at least ex - post, adequate communication of rationale for policies and operations is expected now and, in my view, this is desirable. there are several dilemmas faced by central banks while designing an appropriate communications policy. what should be communicated and to what degree of disaggregation, are one set of issues. the second set relates to : at what stage of evolution of internal thinking and debate

nuance while maintaining the quality of information and credibility of policy. in a sense, we have two sets of problems in this regard, viz., the variety of target audience and the varying nature of media through which communications occur. briefly stated, if a central banker sounds confused at times, he or she may be truly confused ; and it is unlikely to be a pretence. but, there are more occasions when a central banker knows what to say but is confused when it comes to deciding on the design of communication or the appropriateness of media. multiple effects of the media in assessing the contribution of the media to public good, i would distinguish among at least four types of effects. the first type may be characterised as the ‘ news effect ’, which would normally reflect factual or formal positions or events. in a sense, the media ’ s reporting would be faithful and non - controversial. a second type can be identified as ‘ rumour effect ’, and often rumours have a destabilising effect and in some cases have the potential to degenerate into self - perpetuating or self - fulfilling events. the rumour effect often results in unintended losses or gains and people may suspect that there is some vested interest behind such rumours. needless to say, the media ’ s role will, on the whole, tend to be negative in this channel. the third type is marked by the ‘ survey effect ’. it is not uncommon for the media to undertake opinion polls or surveys and these could have methodological and other problems in terms of reflecting the true picture. these surveys have a tendency to influence the perception of markets and sometimes the general public. in such a case, the contribution of the media would depend on scientific methodology adopted, transparency of assumptions, and objectivity in presentation of the results. adequate care is a pre - condition to ensure a positive effect through this channel. the fourth is the ‘ interpretation effect ’, where media tries to interpret the stand taken by policy makers or markets or corporates. the interpretation effect may be positive or negative depending on professional skills as well as commitment to objectives. responsibility and accountability would be key to ensure positive effect through this channel. in brief, it is my submission that the media ’ s responsibilities are not confined to its shareholders or to its subscribers, but extend to the larger segment of the public. in this sense, the challenges and dilemmas before the media are perhaps no less than those before the central banks. dissemination initiatives of