Code of Good Practices on Transparency in Monetary and Financial Policies

The code identifies desirable transparency practices for central banks in their conduct of monetary policy and for central banks and other financial agencies in their conduct of financial policies (July 1999).

The design of transparency practices in the Code rests on two principles. First, monetary and financial policies can be made more effective if the public knows the goals and instruments of policy and if the authorities make a credible commitment to meeting them. Second, good governance calls for central banks and financial agencies to be accountable, particularly where the monetary and financial authorities are granted a high degree of autonomy.

For purposes of the Code, transparency refers to an environment in which the objectives of policy, its legal, institutional, and economic framework, policy decisions and their rationale, data and information related to monetary and financial policies, and the terms of agencies' accountability, are provided to the public on an understandable, accessible and timely basis. The transparency practices in the Code thus focus on:

• clarity of roles, responsibilities and objectives of central banks and financial agencies;

• the processes for formulating and reporting of monetary policy decisions by the central bank and of financial policies by financial agencies;

• public availability of information on monetary and financial policies; and

• accountability and assurances of integrity by the central bank and financial agencies.

Monetary and financial policies are interrelated and often mutually reinforcing, with the health of the financial system affecting the conduct of monetary policy and vice versa. However, the institutional arrangements for these two types of policies differ considerably, particularly with regard to their roles, responsibilities, and objectives and their policy formulation and implementation processes. To take account of this, the Code is separated into two parts: good transparency practices for monetary policy by central banks; and good transparency practices for financial policies by financial agencies. The basic elements of transparency for both policies are, however, similar.

The Code is of sufficient breadth to span and be applied to a wide range of monetary frameworks, and thus to the range of Fund membership. The manner in which transparency is applied and achieved, however, may differ, reflecting different institutional arrangements with respect to monetary and financial policies and legal traditions. The good transparency practices contained in the Code, therefore, will have to be implemented flexibly and over time to take account of a country's particular circumstances.

The transparency practices in the Code are expressed in general terms. As a guide to their implementation, Fund staff has prepared, in co-operation with appropriate institutions, a supporting document. This document provides a fuller description of each transparency practice of the Code, its rationale in the context of transparency, where and how it is practised (including alternative ways to achieve the objective), and some practical considerations in implementation.