José De Gregorio: Transparency and communications in modern central banking Keynote speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the 10th Annual General Meeting of the Interamerican Economics and Finance Journalist Association (AIPEF), Santiago, 17 July 2008. *  *  *  It is a pleasure for me to take part in this event and to have the opportunity of highlighting the importance of communications in modern central banking. Journalists play a fundamental role in transmitting our messages to the general public and that is why we are particularly interested in communicating with you and making ourselves understood to the best of our ability. The time when central banks were opaque is gone. Today, transparency is the key to satisfying the demands that democratic societies make on autonomous institutions like central banks and to achieving monetary policy efficiency. So I would like to talk about transparency with a special focus on monetary policy. Why the need for transparency? In recent decades, central banks have become increasingly more transparent. For many reasons, which I will not go into today, they have moved towards a greater degree of autonomy in the conduct of monetary policy. Central banks have been given operational independence and are able to exercise monetary policy using technical criteria with a medium term perspective. Therefore we have the first reason for central banks to be transparent: the legimitimacy required in a democratic regime of an autonomous institution whose decisions have important implications for national welfare.
The IMF’s Chief of Mission at that time asked me to meet “in six eyes”: mine two and their four. He suggested a devaluation of at least 20%. I told him that I will answer tomorrow. The next day I told him that we will discuss again in autumn during his next visit. The situation calmed during the summer. We started purchasing foreign currency, and the favorable situation continued. Nobody ever opened this issue again. They gave up. The second moment was the closing of Makedonska Banka and forcing few other shareholders to abandon the banking business. It was a very erratic experience. They played extremely unfairly. They were developing and managed to develop dirty plots. They also threatened. They made a mistake. The decisions we believed in were unchangeable. We cleaned the banking sector from shareholders who were not eligible, on any ground. We fixed several weak points in the system thanks to our decisiveness and integrity. And, as to the organizers of dirty campaigns, you know the information. The third, extremely dramatic moment was the end of 2008 and the first half of 2009: the global recession. In that period we spent 500 millions of Euros defending the exchange rate – one third of their total level. We had to try our hardest, otherwise we were about to face an economic disaster. We were criticized for undertaking measures contrary to those undertaken by developed economies. They failed to see that such comparisons will not wash.