Back Matter
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 2 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 3 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 4 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 5 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 6 https://isni.org/isni/0000000404811396, International Monetary Fund

Appendix I: Dincer-Eichengreen Central Bank Transparency Questions

1. Political Transparency

  • (a) Is there a formal statement of the objective(s) of monetary policy, with an explicit prioritization in case of multiple objectives?

    • No formal objective(s) = 0.

    • Multiple objectives without prioritization = 1/2.

    • One primary objective, or multiple objectives with explicit priority = 1.

  • (b) Is there a quantification of the primary objective(s)?

    • No = 0.

    • Yes = 1.

  • (c) Are there explicit contacts or other similar institutional arrangements between the monetary authorities and the government?

    • No central bank contracts or other institutional arrangements = 0.

    • Central bank without explicit instrument independence or contract = 1/2.

    • Central bank with explicit instrument independence or central bank contract although possibly subject to an explicit override procedure = 1.

2. Economic Transparency

  • (a) Is the basic economic data relevant for the conduct of monetary policy publicly available? (The focus is on the following five variables: money supply, inflation, GDP, unemployment rate and capacity utilization.)

    • Quarterly time series for at most two out of the five variables = 0.

    • Quarterly time series for three or four out of the five variables = 1/2.

    • Quarterly time series for all five variables = 1.

  • (b) Does the central bank disclose the macroeconomic model(s) it uses for policy analysis?

    • No = 0.

    • Yes = 1.

  • (c) Does the central bank regularly publish its own macroeconomic forecasts?

    • No numerical central bank forecasts for inflation and output = 0.

    • Numerical central bank forecasts for inflation and/or output published at less than quarterly frequency = 1/2.

    • Quarterly numerical central bank forecasts for inflation and output for the medium term (one to two years ahead), specifying the assumptions about the policy instrument (conditional or unconditional forecasts) = 1.

3. Procedural Transparency

  • (a) Does the central bank provide an explicit policy rule or strategy that describes its monetary policy framework?

    • No = 0.

    • Yes = 1.

  • (b) Does the central bank give a comprehensive account of policy deliberations (or explanations in case of a single central banker) within a reasonable amount of time?

    • No or only after a substantial lag (more than eight weeks) = 0.

    • Yes, comprehensive minutes (although not necessarily verbatim or attributed) or explanations (in case of a single central banker), including a discussion of backward- and forward-looking arguments = 1.

  • (c) Does the central bank disclose how each decision on the level of its main operating instrument or target was reached?

    • No or only after a substantial lag (more than eight weeks) = 0.

    • Yes, comprehensive minutes (although not necessarily verbatim or attributed) or explanations (in case of a single central banker), including a discussion of backward- and forward-looking arguments = 1.

4. Policy Transparency

  • (a) Are decisions about adjustments to the main operating instrument or target announced promptly?

    • No or only after the day of implementation = 0.

    • Yes, on the day of implementation = 1.

  • (b) Does the central bank provide an explanation when it announces policy decisions?

    • No = 0.

    • Yes, when policy decisions change, or only superficially = 1/2.

    • Yes, always and including forwarding-looking assessments = 1.

  • (c) Does the central bank disclose an explicit policy inclination after every policy meeting or an explicit indication of likely future policy actions (at least quarterly)?

    • No = 0.

    • Yes = 1.

5. Operational Transparency

  • (a) Does the central bank regularly evaluate to what extent its main policy operating targets (if any) have been achieved?

    • No or not very often (at less than annual frequency) = 0.

    • Yes but without providing explanations for significant deviations = 1/2.

    • Yes, accounting for significant deviations from target (if any); or, (nearly) perfect control over main operating instrument/target = 1.

  • (b) Does the central bank regularly provide information on (unanticipated) macroeconomic disturbances that affect the policy transmission process?

    • No or not very often = 0.

    • Yes but only through short-term forecasts or analysis of current macroeconomic developments (at least quarterly) = 1/2.

    • Yes, including a discussion of past forecast errors (at least annually) = 1.

  • (c) Does the central bank regularly provide an evaluation of the policy outcome in light of its macroeconomic objectives?

    • No or not very often (at less than annual frequency) = 0.

    • Yes but superficially = 1/2.

    • Yes, with an explicit account of the contribution of monetary policy in meeting the objectives = 1.

Appendix II: CBT-IT Index Questions

Category A: Transparency about Objectives

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Category B: Transparency about the FPAS

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For historical series, the central bank would be awarded 0.1 for each type of financial variables up to a maximum of 0.5.

For forecast series, the central bank would be awarded 0.1 for each type of financial variables up to a maximum of 0.5.

Category C: Transparency about Policy Process

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Appendix III: CBT-IT Index Score for the Czech National Bank in 2017

This appendix applies the CBT-IT questions to the Czech National Bank (CNB) in 2017 and scores the CNB at 11.75 out of 20. Staff at the CNB were given a chance to provide comments and in most cases presented the CNB’s envisaged future plans to strengthen its transparency modalities consistent with the frontiers of IT.

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1

Affiliations: Rania Al-Mashat (Ministry of Tourism of Egypt; this work was completed while she was an advisor to the Director of the IMF’s Research Department.); Aleš Bulíř, Douglas Laxton, Rafael Portillo, and Hou Wang (International Monetary Fund); Asia Kostanyan and Armen Nurbekyan (Central Bank of Armenia); Tibor Hlédik, (Joint Vienna Institute, formerly Czech National Bank); Tomáš Holub (Czech National Bank). We thank Hamid Faruqee, R. Gaston Gelos, Tommaso Mancini Griffoli, Pau Rabanal, Alasdair Scott, and Juan Francisco Yepez Albornoz for useful discussions and comments on this paper.

2

For a discussion of the history of Inflation Targeting in the Czech Republic see Al-Mashat and others (2018a).

3

In the early phases of an IT regime, the central bank may not have had sufficient time to develop an analytical framework that adjusts the expected path of the policy rate to manage the short-run output-inflation tradeoff. We will refer to this form of IT as IT-lite.

4

We use the term MPC for the key policymaking body in all central banks, regardless of the formal name.

6

For models designed for macroprudential policy analysis see Benes, Kumhof and Laxton (2014a,b) and Benes, Laxton, and Mongardini (2016).

7

Although we do not score explicitly the publication of high frequency databases and statistical models for nowcasting, the central bank should nevertheless document them and explain how those data movements and statistical models help impose judgment on the core forecasting model.

8

While the reaction functions may provide reasonable results in normal times, they have difficulty in abnormal times. When policy interest rates are at or very near the effective lower bound, the quadratic loss-function approach appears to produce better results because its response to disinflationary conditions involves an extended commitment to keep the rate at the floor (Obstfeld and others, 2016). The desire for continuity in policy would argue that more attention should therefore be paid to the loss-minimization approach, in both normal and abnormal circumstances. Nonetheless, this does not imply that information from the reaction function should be ignored. It can serve as a crosscheck to the results from the loss-minimization approach, especially when there is concern that the model specification may be less than satisfactory.

9

The principle is sometimes referred to as the Taylor principle.

10

For examples of papers that construct model-consistent confidence bands with the effective-lower bound for the policy rate see Clinton and others (2010) and Alichi and others (2015b).

11

In some countries, the Governor of the central bank, rather than a committee, is accountable for the conduct of monetary policy, e.g., New Zealand. The Governor may well set the main themes of the forecast. She or he must therefore defend it, in justifying her or his policy actions.

12

For an early review of CNB communication transparency and clarity, see Šmídková and Bulíř (2007).

An Index for Transparency for Inflation-Targeting Central Banks: Application to the Czech National Bank
Author: Rania A. Al-Mashat, Mr. Ales Bulir, N. Nergiz Dinçer, Tibor Hlédik, Mr. Tomás Holub, Asya Kostanyan, Mr. Douglas Laxton, Armen Nurbekyan, Mr. Rafael A Portillo, and Hou Wang