Albeit fairly intuitive at first sight, now academic research has lent support to this notion: The more people understand monetary policy, the happier they are with central banks. Put differently, as a recent paper argues: “The less someone knows about central banking, the less likely he or she will be satisfied with the institution.”
Many central banks, from both developed and developing countries, have been running educational programs and reaching out to the wider public over the past years. Adriel Jost of University of St. Gallen and Swiss National Bank (SNB), provides clear justification for such efforts in the paper titled “Is Monetary Policy Too Complex for the Public? Evidence from the UK”:
Central banks have increased their engagement in the information and education of the broad public. But what can be said about the nonprofessional’s knowledge of monetary policy and central banking? Based on the Bank of England’s Inflation Attitudes Survey, I construct a score to capture the central banking knowledge of the respondents. I show that the average British person displays limited knowledge of central banking. At the same time, the data reveal that satisfaction with the Bank of England’s policies increases with a better understanding of monetary policy.
Investing energy and money to increase transparency and broaden communication outreach activities to financially educate the public and explain what central banks are doing and how seems vindicated by this analysis. That said, the paper also concludes, and quite rightly, that central banks might benefit from a certain level of financial ignorance among members of the public:
“No one can be forced to learn. People may simply have no incentives to learn about monetary policy, especially if they are generally satisfied with the central bank … All the more, ignorance in monetary policy may be appropriate, as monetary policy knowledge is less necessary in everyday decisions than financial knowledge.