Central banks are traditionally used to operating at some distance from the public gaze. But transparency is well recognised today as a key instrument in the toolkit of central banks - and often as a requisite accompaniment to operational autonomy.
Radical moves towards greater transparency have been made during recent years, with the development of central bank websites and other communication tools as well as the publication of monetary policy minutes, a practice now followed by most advanced economies and many emerging markets.
Every movement, however, requires its pioneers. There is a select group of central banks that have led the way in transparency - among them the Reserve Bank of New Zealand, the Bank of England and the central banks of the Czech Republic and Hungary. Of the pioneers, though, Sveriges Riksbank is the one that continues most determinedly to break new ground in ensuring its processes and decision-making are transparent and clearly communicated through whichever channel is most effective.
The rationale behind this transparency drive, according to Riksbank governor Stefan Ingves, is that "being open and clear about when, where and how we provide information gives all groups in society equal opportunities to obtain information about the work and decisions of the Riksbank". Being open, Ingves said, is also "more efficient and predictable since all stakeholders are completely aware of the communication process".
One telling example of the attitude Sweden's central bank takes to transparency can be witnessed with how the Riksbank has changed the way it explains its monetary policy decisions to the public.
The central bank used to publish a written Q&A online, featuring three questions about the monetary policy decision that had just been taken. "After a while when we monitored how many people read that, it was less than 20 people," says Ann-Leena Mikiver, the Riksbank's head of communication. While the Riksbank could not be accused of a lack of transparency - the questions and answers had been put in the public domain - the information was not getting across to the public, so it was time to try a different tack. "We started to make films with [the governor] instead," Mikiver explained, "and suddenly we had about 2,000 viewers - and it was exactly the same message. So it's choosing the right channels and mixing them in the right way."
Various academic attempts have been made to measure central bank transparency since the end of the 20th century. The Riksbank has been at or near the top of the rankings ever since it began. One of the most authoritative studies is carried out by Barry Eichengreen and Nergiz Dincer, who have built up a series of scores since 1998. The Riksbank currently tops the rankings - with 14.5 points out of a possible 15 - a position it has held since 2002.
The Riksbank's strategy is constantly evolving, however - and some of the current communication norms were born out of episodes in 2006 and 2007 when the central bank came in for criticism for giving ‘mixed messages' and surprising markets. As a result, the central bank made a number of changes to the way it communicates monetary policy decisions to the public, including press conferences after each monetary policy meeting; detailed minutes of the discussion, with no anonymity for members; and a policy of avoiding giving any indication in between meetings of the upcoming decision. The Riksbank also publishes its forecasts for a wide range of economic indexes and almost all information is made available in English as well as Swedish.
"Communication is so crucial for central banks in order to build confidence and manage expectations. We are dependent on the confidence of many party groups," says Mikiver - highlighting that the Riksbank is assessed by parliament once a year, and is called before a parliamentary finance committee a couple of times a year.
New additions in 2013 to the Swedish central bank's public information include aggregate data on the distribution of reserve assets and foreign exchange exposure - and, most recently, detailing the location of the bank's gold reserves, after negotiations with the other central banks which store it.
Too much information?
Transparency, however, brings its own challenges - including the question of ‘how much information is too much information?' The Riksbank strategy up until now appears to have been to put virtually all of its information in the public domain. But it is now developing a new communications strategy aimed at ensuring the right information reaches the right audience.
"We are thinking about how to direct our communication in the best way, to different audiences," says Mikiver, a former communications chief at AstraZeneca. "Since we are so central to the Swedish economy we have many target groups, but the most important are politicians, the financial markets and the media as a channel to the public; also the labour market, and the scientific arena."
For example, academics tend to want to have more detailed information about the Riksbank than the general public. "So we are thinking about how to address this better," she says. "The challenge is that we need to avoid ‘over-information'."
Another issue is that the level of transparency around monetary policy decision-making means that, inevitably, the central bank does not always appear to speak to the markets with one voice. Decisions are reached on a majority basis, but committee members that disagree are free to explain why - and in some detail. Last year, intractable differences on the monetary policy committee led deputy governor Lars Svensson to quit the central bank - a decision, in true Swedish openness, that was accompanied by a press conference at the Riksbank.
Mikiver says the central bank does not view public expression of differences of opinion among top officials as a problem. "The communications challenge is more in explaining to the surrounding world that this is the set-up the Riksbank has," she says. "You can describe it either as a problem or as proof that we have an open and transparent central bank - but this is the purpose of having six members in the executive board. And this is positive because you can follow the discussion and the individual members' arguments and you can see how they voted."
The next frontiers
The Riksbank is, in many ways, a paragon of transparency - not only from an international perspective, but also among Swedish institutions. But, as the world catches up, expectations also rise - meaning Sweden's central bank will "need to take transparency one step forward", according to Mikiver.
One of the Riksbank's next priorities, she says, is to be quicker in getting the Riksbank's view into the public domain through the use both of social media and other more traditional channels. Technological innovations, notably Twitter, are playing their part in changing the landscape for communications professionals - but Mikiver stresses it is also important not to lose sight of what audiences actually want.
"One conclusion from our recent target group analysis," says Mikiver, "is that they want to have more personal dialogue with us - not only with the board, but also with the experts here in the central bank." Mikiver added that stakeholders are interested how these experts conduct their analysis as well as learning how they work out their forecasts. "This is an area of communication where we can improve. We are looking into how to create more of a dialogue and an informal setting and also, to a larger extent than today, expose our own experts to explain the data behind the decisions."