Recent monetary policy research re-emphasizes the role of central bank transparency and accountability. Whereas improved transparency was first discussed in the legacy of Barro/Gordon, Kydland/Prescott and the time inconsistency problem of monetary policy, nowadays the focus is rather on better communication in order to get inflation expectations anchored. Communication and disclosure policy can hardly substitute interest-rate movements, but it can support central banks in conducting monetary policy.
Central bank accountability is a matter of governance since central bankers are unelected public officials, implementing policies that affect society at large.
Debauched by recent developments in corporate governance structure (just to mention the Sarbanes-Oxley Act as a reflex to a number of major corporate and accounting scandals) some researchers pointed out that governance standards should hold for central banks as well (see Camilleri et al. and a confernce of the Swedish Riksbank) including audit committees, internal controls and transparent disclosure policy.
In my view, we do not need such requirements, especially an audit committee. There may arise much more problems than can be solved when implementing such committees since we do not know who should participate in this body. Ministers? Council members? Researchers? ECB Observers? Not to mention goal conflicts when it comes to auditing procedures and disclosures of audit reports. This would rather alienate financial markets and increase volatility of asset markets.
The best auditor anyway is the public. It can audit on a day-to-day basis whether central banks meet their objective, i.e. price stability. History shows that the best way to increase central bank reputation is to commmit to and achieve price stability and not to improve governance structures.
