1. Big Ben: An Essay on U. S. FederalReserve Communications
ABSTRACT
This perspective essay is an attempt to explain what the US Federal Reserve System at
Washington D.C. defined as its communications policy under the leadership of Ben S.
Bernanke who served as the Chairman of its Board of Governors from 2006 to 2014. It also
explores briefly the antecedents of the Fed’s communications policy in earlier eras under the
chairmanship of Paul Volcker (1979-1987) and Alan Greenspan (1987-2006) and when
Bernanke served as a Governor on the Board of the Federal Reserve. The essay also examines
the contributions made by Vice Chair Don Kohn, members of the FOMC like Frederic
Mishkin, and the Federal Reserve System including those of William Poole at the St. Louis
Fed to the development and dissemination of the Fed’s communications policy within the
United States and in other monetary jurisdictions. The essay concludes by comparing the
similarities between the communications policy of Ben S. Bernanke and his successor Janet L.
Yellen. The main argument in this essay is that there has been an unproblematic
continuation in terms of the themes and concerns in the Fed’s communications policy, and
that Yellen’s approach as both Vice-Chair and as Chair of the Board of Governors, is an
attempt to build on the communications policy of her predecessors, and her own work in this
area when she chaired the Sub-Committee on Fed Communications under Chairman
Bernanke.
The main focus is however on Bernanke’s attempt to bring together a number of sporadic
attempts in the past to increase the over-all levels of accountability and transparency at the
Federal Reserve System in a way that makes his term an interesting case study not only for
American bankers but for central bankers everywhere. Bernanke’s term at the Federal Reserve
coincided with the emergence of a world-wide movement towards central bank transparency
and attempts by central banks to innovate unconventional policy measures to stimulate the
economy in the wake of the financial crisis of 2008. So, in addition to the usual motifs of
accountability and transparency in central banking, Bernanke’s communications policy at
the Fed is also characterized by the attempt to explain the rationale for monetary policy tools
such as quantitative easing (i.e. large-scale asset purchases) and forward guidance on matters
pertaining to the policy path of the short-term federal funds rate. This is an area of Fed policy
that Bernanke and increasingly Yellen have made their own. In so far as their experiments in
unconventional monetary policy and in communicating the rationale and results thereof have
set important precedents, this essay will be of interest to central bankers and economists who
want to think-through the policy implications of doing so in their own monetary
jurisdictions.