Talking about monetary policy: the virtues (and vice?) of central bank communication

Central banks, which used to be so secretive, are communicating more and more these days about their monetary policy. This development has proceeded hand in glove with a burgeoning new scholarly literature on the subject. The empirical evidence, reviewed selectively here, suggests that communication can move financial markets, enhance the predictability of monetary policy decisions, and perhaps even help central banks achieve their goals. A number of theoretical drawbacks to greater communication are also reviewed here. None seems very important in practice. That said, no consensus has yet emerged regarding what constitutes "optimal" communication strategy - either in quantity or nature.This is part of a series of BIS Working Papers (273 to 278) collecting papers presented at the BIS's Seventh Annual Conference on "Whither monetary policy? Monetary policy challenges in the decade ahead" in Luzern, Switzerland, on 26-27 June 2008. The event brought together senior representatives of central banks and academic institutions to exchange views on this topic. BIS Paper 45 contains the opening address of William R White (BIS), the contributions of the policy panel on "Beyond price stability...