Faculty News

Professor Kim Schoenholtz's joint research on improving US monetary policy communications is spotlighted

Excerpt from Frankfurter Allgemeine Zeitung -- (translated from German using Google Translate) "Cecchetti and Schoenholtz make three suggestions in their conference paper. [Their] first suggestion should be self-evident, but it is not yet: Central bank statements should be written in understandable language. This includes making a dissent among the decision-makers clear without getting lost in endless statements. Although it may be difficult to surpass the volubility of the members of the Central Bank Council of the Deutsche Bundesbank in the 1980s and early 1990s, there is now an increase in public statements by monetary policymakers to an extent that does not promote the dissemination of a clear message. The independence of from central banks is an important achievement, but in troubled times it is not sacrosanct. It is therefore not bad for the leadership of a central bank to be perceived as a capable team, rather than and not as a chronically quarreling bunch.

Secondly, Cecchetti and Schoenholtz recommend clear statements from monetary policymakers regarding how they would change course as economic perspectives change. This is a very demanding proposal that is more likely to come to academic economists than practical monetary policy makers. It is not only difficult for monetary policymakers to communicate clearly how they would, for example, respond to an intensification of international trade conflicts. An overly detailed scenario analysis could also give monetary policymakers an excuse to be too active in responding to changes in the environment."

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