In the Festschrift for former Norges Bank governor Hermod Skånland, Professor Preben Munthe writes the following: “There is a tradition that expects central bank governors to be parsimonious with words. This built up the aura that should surround a man in that position. He possessed knowledge about the secret black box – monetary policy with a capital M – and how it functioned. Without asking others, he changed the discount rate and thereby intervened in the economy with authority and deep insight. On seldom occasions did he step down from his cloud of wisdom to impart life’s economic truths to a gaping public.” 4 A change in views and practices relating to transparency first occurred in recent years, both in Norway and other countries. 5 It can safely be said that the change has been swift and radical. Today, most central banks are open about (i) the objective of monetary policy, (ii) its strategy for reaching the objective and (iii) the background for and the process behind interest rate decisions. Norges Bank is no exception in this respect. In some areas, Norges Bank has gone further than others. For example, Norges Bank is one of the few central banks in the world that publishes forecasts of its own interest rate decisions. 6 What then can explain this tendency towards greater transparency? I would highlight two main reasons. First, there has been a general trend in society towards greater transparency. Second, economic thinking has changed considerably.
On the other hand, such transparency may inhibit the actual discussion. Members may come to meetings with pre-drafted statements, impairing a constructive exchange of views. Researchers have compared tapes of the Fed’s FOMC meetings before and after it was decided that the minutes should be published. 31 The tapes show that the form of discussion changed. During the period following the decision to publish the minutes, there was a greater tendency for members to read prepared statements. Detailed minutes also entail a risk of moving the real discussion from the official meeting into closed rooms. In that case, a real increase in transparency has not been achieved. The US was aware of this risk and introduced legislation to prevent such informal meetings. They called this law the “Government in the Sunshine Act”, 32 where the name symbolises that important decisions should be taken in the public light. The law defines a meeting as a consultation between a quorum of committee members. Stretching it somewhat, this means that if some members are chatting in the corridor, they must stop talking about the interest rate and start talking about the weather if the group grows to a certain size. The notion that increased transparency can hamper a free exchange of views is not new. The delegates to the Constitutional Convention in Philadelphia in 1787 decided to veil the deliberations in secrecy. According to the Virginia delegate James Madison, who later became the fourth US president, secrecy was crucial for succeeding in the work on the US Constitution.