(www.lombard-rates.com 23. 3. 2016)
What in your personal view is a clear signal of the transparency of a central bank?
Quite honestly, the primary indication can be found by looking at a given institution's web page. If I am interested in anything about a particular central bank, I immediately – because I'm impatient and want the information NOW – have a look at their website. If I am able to find three out of three of my sought pieces of information, I take that as a reasonable signal of the transparency of the concerned central bank. Moreover, if I can find specific information quickly, I can see that someone there is thinking about effective communication. In this respect, I regard the Czech National Bank as a highly transparent bank because, if I need to find certain information about it immediately, instead of going through a lengthy process of asking people at the bank, I first open our web page and try to find the answer and I usually succeed.
How much more open could your central bank become? What are the limits on the transparency of a central bank? Where in your view does the transparency of a central bank have to end?
I don't think there is a firm limit to the openness of a central bank. It's like the development of human knowledge – it too has no limit, it's rather an endless process. Transparency is about your attitude, your approach – if disclosing information doesn't jeopardise you in the pursuit of your statutory objective, doesn't cause you prohibitive costs and doesn't asymmetrically help another party with whom you have, say, a legal dispute, then such information should in principle be public. Sir Humphrey Appleby says: "If no one knows what you’re doing, then no one knows what you’re doing wrong." A transparent central bank doesn't think that way.
What have you found to have been the most difficult moment in your central bank’s efforts in communications in recent years? What was the lesson learned?
In general, the whole situation after the economic crisis in 2008 was very difficult. This was not only true for the CNB, but for many central banks worldwide. Monetary policy (whose defining feature is that it's working best when people don't notice it) has become a standard part of public debate, with all that that entails: disinformation, demagogy, misunderstandings, slander, personal attacks and so on. I believe no one in the central banking world was prepared for the debates about central banks to become as common as the public conversation about soccer or politics. We are all struggling with that even today.
How important is communications to your central bank’s current policy? What is the biggest challenge in your communications at the moment?
The biggest challenge? To explain to people that we live in a system of elastic money (i.e. money with no intrinsic value and no fixed quantity) without them starting to doubt the very foundations of that system. It is really a paradox. As long as elastic money works normally, no one thinks about why we pay with it and why we save in it. This is proof that a central bank is doing a good job, because money is maintaining its purchasing power thanks to price stability and no one has to think about why it is so. Generally, we as consumers like systems that work without us having to wonder why – why the lights go on when we want them to, why a car engine runs every time we start it, why we can pay smoothly by card in so many places. We start to think about a system only if a problem occurs – when there is a blackout or the engine doesn't start. The challenge for the central banks is to explain that everything they have been doing since 2008 is in an effort to prevent, not to create, a blackout! Many people in money-conservative countries such as the Czech Republic still live psychologically on the gold standard. This doesn't matter in good times but, in bad times, it makes the job of communicating difficult for central banks, which explain that there is no gold standard and thereby try to do their utmost to build public understanding of their objectives and actions, and thus enhance their credibility. But people are unsettled by their explanations and, for their own peace of mind, prefer to live in the illusion of the gold standard, which, however, central banks can't support. Yet, without central banks taking action in bad times, we can hardly have good times when people don't have to think about the system. I would call it the communication puzzle of the ordinary central bankers in my country.
Who are the most important stakeholders in the communications of a central bank?
That's easy: purely and simply the general public. Monetary policy is also politics, but politics cut off from the usual political mechanics. Interest rates, exchange rates and inflation affect everyone but, as I hinted earlier, this is somehow more immediate to everyone in bad times. My experience ultimately is that prejudices, opinions and comments about the central bank often do not differ between the general public, politicians, journalists and business leaders. So, if an aspect of communication works on the general public, it works on all imaginable stakeholders.