Noisy Politics, Quiet Technocrats: Strategic Silence by Central Banks

Abstract

In contrast to the “quiet” politics of the pre-2008 period, macroeconomic policy has become “noisy”. This break raises a question: How do independent agencies designed for quiet politics react when a contentious public turns the volume up on them? Central banks provide an interesting case because while they are self-professed adherents to communicative transparency, individual case studies have documented their use of strategic silence as a defense mechanism against politicization. This paper provides a quantitative test of the theory that when faced with public contention on core monetary policy issues, central banks are likely to opt for strategic silence. We focus on the most contested of central bank policies: large-scale asset purchase programs or “quantitative easing” (QE). We examine four topics associated with particularly contested side effects of QE: house prices, exchange rates, corporate debt, and climate change. We hypothesize that an active QE program makes a central bank less likely to address these topics in public. We further expect that the strength—and, in the case of the exchange rate, the direction—of this effect varies depending on the precise composition of asset purchases and on countries' growth models. Using panel regression analysis on a dataset of more than 11,000 speeches by 18 central banks, we find that as a group, central banks conducting QE programs exhibited strategic silence on house prices, exchange rates, and climate change. We also find support for three out of four country-specific hypotheses. These results point to significant technocratic agency in the de- and re-politicization of policy issues.