شفافیت "رد پا" های بانک های مرکزی : نقش سوابق دقیقه ای / رای گیری

In most academic studies the ECB is seen as more transparent than the FED. However, the perception of ECB transparency by the media and market participants is different. This study will examine the role of minutes/voting records as a possible cause of the differences in the perception of transparency between the academics and the media/market participants. As a proxy of how the media/market participants perceive Central Bank transparency, a content/thematic analysis of CNBC video clips was conducted for four central banks – ECB, FED, BOE, and BOJ. The result of the study yielded a three-dimensional ‘footprint’ of the importance of minutes/voting records as perceived by the media/market participants. In the ECB's case, the three-dimensional ‘footprint’ was extrapolated. The three-dimensional ‘footprint’ of the importance of minutes/voting records could be used to value the relative importance of minutes/voting records in transparency/disclosure indexes or as a ‘quick’ proxy for financial market participants to measure the transparency of Central Banks.

The literature reveals the possible reason why there is a perceived lack of transparency by the media and market participants. According to de Haan et al. (2005), all of the transparency (disclosure) indexes had ranked the ECB high in terms of transparency except the study by Siklos (2002) which ranked the ECB as the lowest in terms of transparency. The difference was on the higher value that Siklos (2002) had placed on the release of minutes and voting records. This study by providing a new method to measure the importance of minutes/voting records to participants in the financial market addresses the above discrepancy found by de Haan et al. (2005). And by using this new method, we can extrapolate a three-dimensional ‘footprint’ of the importance of minutes/voting records as perceived by the media/market participants for the ECB. Finally, this method can be used by financial market participants as a ‘quick’ proxy to measure the transparency of central banks. Thus, the relevant research question in the case of the ECB is: what role does the non-release of minutes and voting records play on the perceived lack of ECB transparency by the media and financial market participants? And if the ECB released minutes and voting records, would it matter? To answer this question, an inductive process was used as the research methodology. Texts from video clips of television broadcasts in the financial media were collected and analyzed using content analysis. The data were then analyzed using thematic analysis to overcome some of the drawbacks of content analysis (Grbich, 2007). The results show that the media and financial market participants attach importance (weight) to the release of minutes and voting records by the FED and the BOE and on occasion by the BOJ. Regarding interest from the media and the financial market, the ECB does poorly especially considering the size of the economic area under its control. In conclusion, the non-release of minutes and voting records – in the case of the ECB – does play a role in the perceived lack of transparency by the media and financial market participants. In addition, the release of minutes/voting records by the ECB would matter less than the market expects. Limitations of this study with suggestions for future research are then provided.

A review of the disclosure (transparency) index studies, a ‘gap in the literature’ was discovered. It was revealed that academic studies and the general perception in the media and financial markets differ regarding the transparency of the ECB. Academics have a more favorable view on ECB transparency than the media and financial markets. The conclusion arrived by Siklos study in 2002 that the ECB has the lowest ranking of the banks, mainly as a result of a greater weight placed on minutes/voting records, which is closer to what the market perceives. Not correctly accounting for the weight differences among the different factors might lead to wrong conclusions about the relative transparency of central banks. Additionally, these factors could carry a different weight depending upon the central bank in question. For example, a central bank that always needs to take action first (the FED or BOE) since the structure of the economy (demand or consumer based) results in that economy being a leading economy in the business cycle. Leading economies might need to do things differently in terms of transparency than lagging economic areas (Eurozone and Japan represented by ECB and BOJ). For example, in the case of the Fed, knowing the biases (through past voting records and minutes) of each committee member might be considered crucial for the market in terms of predicting the next move (see Chappell et al., 2005: 183–191 for complete discussion). Thus, voting records/minutes in this case significantly increase transparency. The market knows which members are hawkish or dovish (commonly cited in the press). Furthermore, in the most recent round of interest rate hikes (2005–2007), the FED paused when inflationary pressures were still considered high (summer of 2006) on a bet by the FED that inflation expectations would fall in the future. Actually, it was the chairman of the FED (Bernanke) and his style of doing things differently versus his predecessor – Greenspan, which resulted in this pause. The thinking was that the economy could be engineered towards a ‘soft landing.’ This is something the ECB would never have done. Thus, knowing the style and preferences (dovish or hawkish) of the decision makers sitting on the monetary policy committee is very important for market participants trying to forecast the direction of interest rate moves. This extra level of information which is provided through a careful analysis of the minutes/voting records adds an extra level of transparency for the FED, which is lacking in the case of the ECB. FED is widely followed in the financial market that is widely known. The reason behind the ‘leading’ role of the FED is probably due to multiple reasons, but institutional factors could play a big role. For example, decisions are expected to take longer in the Eurozone. This is pointed out by de Hann et al. (2005:125) who state ‘…within the Eurosystem the national central banks play an important role. Unlike other similar central banks, the ECB is very decentralized. This is not only true for the implementation of monetary policy but also for the decision-making process with the Governing Council of the ECB… this decentralized setup can be problematic. A crucial factor is the extent to which the countries in the euro area are alike. Where countries (or sizable regions) are at different points in the business cycle or have diverging inflation rates, decision-making on the appropriate monetary policy stance becomes a difficult task. Furthermore, if the monetary policy transmission mechanism differs across member countries of the monetary union, the appropriate size and timing of monetary policy decisions become difficult to assess.’ In their comparison of the FED and ECB, Ruckriegel and Seitz (2002: 7–8) state that the legal objective of the ECB is maintaining price stability following from Article 105(1) of the EU Treaty, whereas for the FED the legal objective is several goals – maximum employment, stable prices, and moderate long-term interest rates. The ECB even has a definition of this objective which is to keep inflation below 2% over the medium term specifically using the HICP (Harmonized Index Consumer Prices) to measure inflation. For the FED, no such explicit objective exists. To see how institutional factors might influence the financial market participants, we need to take into consideration market timing in a trading framework. During the early part of the business cycle recovery phase, the FED is more likely to lower interest rates to spur employment than the ECB due to FED's goal of maximum employment. Likewise, during the boom phase of the business cycle, the FED is more likely to hold rates steady a little bit longer again due to employment and growth considerations. In addition, the FED is likely to be more decisive throughout the business cycle compared to the ECB due to institutional factors mentioned earlier. This is in contrast to the ECB which is more likely to hold rates higher during the recovery stage due to inflation concerns and to raise rates earlier during the boom again due to inflation concerns. In short, the result is that the trading/investment cycle arrives later and ends earlier in the Eurozone. If we combine this with the slower decision-making due to institutional factors in the Eurozone and other factors, such as the forecasting reputation of the FED and the flexible structure of the US economy, then it becomes clearer as to why the financial markets view the FED as a ‘leading’ central bank. In terms of interest from the media and financial markets, Section 4.1 under the analysis section showed that the ECB receives about 65% less interest from the media/financial market than expected and that the FED receives about 771% more interest from the media/financial market than expected. One reason for this big difference could be that the market follows the FED closer because it is seen as the best central bank at forecasting. Kohn and Sack (2003: 22) state that ‘The Federal Reserve has been broadly correct in the direction of the economy and prices over the past two decades, on occasion spotting trends and developments before they were evident to market participants, and this record has enhanced its reputation and credibility. Indeed, Romer and Romer (2002) provide statistical evidence that the Federal Reserve staff forecasts for output and inflation have been more accurate than private sector forecasts over the past several decades. As discussed in that paper, the impressive forecasting performance of the Federal Reserve may reflect the fact that it devotes considerable resources to analyzing and predicting the course of the U.S. economy – much more than any other entity.’ Regarding the importance of minutes, the findings derived from Sections 4.3 and 4.4 under the analysis section showed that out of the seven themes identified through thematic analysis, two themes were found to be special. These two themes acted as a trigger for the cases to reach the 99% CI (p < 0.01 significance level) in terms of number of VCs and Total Minutes. The two special themes were: (1) high uncertainty in market or surprised by central bank move and (2) close call by committee members or ‘controversy.’ And all seven themes identified through thematic analysis seem to support the view that the market uses the minutes and voting records to help in forecasting an uncertain future. The media and financial markets attach more importance (weight) on the release of minutes when the case or announcement date is in the 99% CI (p < 0.01 significance level) or 95% CI (p < 0.05 significance level) at the upper bounds for all three central banks when compared to normal or lower bounds cases. Also the magnitude of the importance (or weight) the market attaches to minutes/voting records varies depending on the central bank. Finally, the importance (or weight) regarding the release of minutes and voting records can be mapped in three dimensions – theme coverage, depth, and broadcast time. Thus, we can now ask an interesting question. Which of the three central banks would the ECB resemble most in terms of the three-dimensional radar chart? In other words, if the ECB released minutes and voting records, would it matter? To answer this question, a determination must be made regarding which central bank or banks (FED, BOE, and BOJ) the ECB resembles most in this study. The four major central banks in the world today are the FED, ECB, BOJ, and BOE. Although other central banks were not included, this is not seen as limiting the results of this study. For example, the central banks of Canada and Australia were not included. However, these two economies are resource-based and thus it would not be ideal to use their central banks as comparisons. Other developed economies are too small – New Zealand, Norway, Sweden, Switzerland – to be useful in any comparison. The economy of the U.S. is roughly the same size as the European economy, but differs structurally. The U.S. is also a leading economy in business cycles versus the European economy which is lagging. The next option is Japan in terms of economic size. In addition, the Japanese economy is structurally closer to the mainland European economies. Thus, we can use the BOJ as a closest model for the ECB. However, the ECB will also resemble some elements of the FED. It was seen that the ECB receives 64.65% less interest from the media/financial market than expected. The expected value was 43.90. The actual value for the ECB turned out to be 15.53, which was less than the BOJ value of 22.80. If the ECB released minutes/voting records, the transparency of the ECB would increase. Therefore, more interest from the media would be expected. However, it still should be less than the expected value since the ECB is a lagging economy like the BOJ. What would be a reasonable number? Possibly somewhere between the BOJ value of 22.80 and the ‘ideal’ expected value for the ECB at 43.90. This would result in a value of 33.35 or roughly 1.5 times the BOJ value of 22.80. Using the increased media interest for the ECB estimated at 1.5 times the BOJ value based on the assumption that the ECB releases minutes/voting records in combination with the BOJ minutes analysis, an estimated value can be put on potential ECB minutes/voting records releases. The analysis of the BOJ minutes, revealed a pattern in which the media/market participants took no interest (11 cases with zero value) unless the BOJ surprised the market or there was controversy (the two trigger themes pushing the cases to the 99% CI) or important analysis (95% CI for one case). The ECB is expected to have a similar pattern since like the BOJ it represents a lagging economy, so most of the cases (announcement dates) would not grab the attention of the media/market participants. The ECB tends to raise rates slowly and at a measured pace. The only interest from the media/market participants would be when the two trigger themes – surprise and controversy – occurred. Thus, a pattern of zeros for most cases, except when the ECB either surprised the market or controversy arose. Finally, the ECB should have a similar ‘footprint’ in terms of makeup in the three dimensions – theme coverage, depth, and broadcast time as the BOJ, but the size of the ‘footprint’ should be larger. How much larger? A good estimate from our analysis on the preceding page on media interest would be 1.5 times bigger than the BOJ. In sum, for the ECB release of minutes/voting records would matter less than the market expects and with a smaller ‘footprint’ than the FED and BOE in the three dimensions (except Depth BOE). Following up on this logic, a radar chart can be constructed showing what the three dimensions for the potential release of minutes/voting records would look like for the ECB is shown below: Full-size image (7 K) Figure options 5.1. Limitations and future research In addition to the limitations mentioned under Section 3, the conclusions of this study do not take into account the effects of accountability and credibility, both of which are related to transparency. Also a discussion on the structure and comparability of different central banks was not covered. Due to time limitations, the author limited this study to addressing the specific gap in the literature. However, this study would have been more robust, if some of these broader issues were discussed. Regarding future research, the results of this research study naturally fit in with studies comparing the transparency of central banks through the disclosure (transparency) indexes. In addition, the methods employed here could be used to study the importance of other information released by central banks, such as various economic reports. Finally, in a world of uncertainty, transparency and communication become more important for central banks and regulators. If less uncertainty can be created through better transparency and communication, then this will create more efficient markets resulting in better regulation and consequently better mitigation of crises. The results of this study could be useful in future research on signaling theory and regulator effectiveness in terms of their efficiency at controlling systematic crises.