Modern Monetary Policy and Central Bank Governance: A Story of Two Tales

Political voice on monetary policy: Evidence from the parliamentary hearings of the European Central Bank

“…However, as soon as economic theory started to recognize the importance of institutional settings in determining macroeconomic performance, i.e. in both New Classical and New Keynesian models, this topic started to gain influence (Eijffinger and Masciandaro, 2014). Identifying the most appropriate governance framework to design the relationship between the incumbent government and the central bank thus became a crucial element in monetary economics (Barro and Gordon, 1983;Backus and Driffill, 1985;Rogoff, 1985;Lohmann, 1992).…”

Central bank communication and social media: From silence to Twitter

“…Since then, central banking practices have been significantly reshaped as a growing number of central banks, which have directed their communication towards the principles of openness and transparency (Geraats, 2002; Demertzis & Hallett, 2007; Blinder et al., 2008; Dincer & Eichengreen, 2014). Although limitations to central bank transparency exist (see, for example, Morris & Shin, 2002; D'Amato et al., 2002; Mishkin, 2004; Svensson, 2006) and there is still much debate on what constitutes an optimal communication strategy, the existing consensus in monetary theory stresses the importance of transparent communication for an effective transmission of monetary policy decisions (see Eijffinger & Masciandaro, 2014, for a review).…”