Donald Kohn writes a response to the annex sent to the Treasury Select Committee from David Aikman on the topic of FPC accountability and specifically how to quantify its financial stability objective.

From: Donald Kohn (Robert V Roosa Chair in International Economics, Brookings)
Published: 14 March 2022

In a recent letter to the Treasury Select Committee and blog post, David Aikman has made a number of thoughtful suggestions for improving the transparency of the FPC.  From my perspective as a former member of the FPC, I completely agree with his objective and with several of his specific suggestions, but I also see caveats around some of them.

One of the ones I cannot endorse is to publish transcripts of FPC meetings after 8 years.  My problems with the transcripts stem from my experience as a staffer and member of the Federal Open Market Committee of the Federal Reserve when it decided to publish transcripts of its meetings.  That decision, in early 1993, changed the character of the meetings: members began to read prepared statements and the amount of give and take decreased considerably.  Members used their participation at each meeting to influence future policy, rather than debate the issues most immediately at hand.  To be sure, that partly reflected leadership style, but it most definitely also responded to transcript publication.

With that background, I really enjoyed and benefited from the free-flowing discussions on the FPC. I know I changed my views as I listened to them, and felt I had a genuine opportunity to influence the views of others, and I wouldn’t want to jeopardize this atmosphere by publishing transcripts.

Still, I agree with Aikman that accountability for the FPC would be advanced by a better understanding of the analysis and variety of perspectives that informed each decision.  So, like Aikman, I would publish the staff papers for the FPC after a long interval—say five years or more.  Staff papers for the FOMC are released with the transcripts after five years, but, unlike for decision-makers, I didn’t observe any new constraints on this key input after the staff knew they would be published.

Instead of transcripts, however, I would enhance the record of each meeting to give more of a flavor of the discussion—the different perspectives that were expressed in the deliberations.   None of that comes through in the current version of the record, which is entirely focused on the resulting consensus.  I suspect this type of record could not be produced on the current accelerated schedule, but the FPC should give careful consideration to the costs and benefits of stretching that schedule out a bit to enhance the usefulness of the product.

With respect to his other suggestions, I agree that a new list of key indicators with “standard-risk” metrics around each would be a useful way for the FPC to communicate about its reaction function so outsiders could evaluate and to a degree anticipate FPC actions and stress test designs.  I caution, however, that I looked at different combinations of indicators, depending on my perceptions of the source of risk at each juncture and my assessment of when each might be flashing yellow also depended on the whole circumstance. I’m sceptical that the FPC could find one parsimonious list with prescribed triggers that would be useful in a wide variety of situations.

I also agree with Aikman that GDP at risk is a promising avenue for research to quantify systemic risk and help the FPC.  This metric was presented to the FPC on at least one occasion when I was a member of the committee.  I think it’s fair to characterize its reception as mixed; some members welcomed the attempt to capture and measure systemic risk (Governor Carney made it a centrepiece of his final speech on macroprudential policy), while others were more sceptical of its utility.  Still, it is a good research avenue to explore and the Bank did publish two new working papers on it in 2021.

Macroprudential policy is a relatively new discipline and the FPC is on the frontier of making this policy.  The study of macroprudential policy is just beginning to build the sort of deep and extended analysis available to monetary policymakers.  That leaves plenty of room for advancement in the study, execution, and public knowledge and accountability of this policy. Aikman’s suggestions and the research and policy agenda more generally behind “macroprudential matters” are most welcome additions.


  • Robert V. Roosa Chair in International Economics and senior fellow in the Economic Studies program at the Brookings Institution. Kohn is a 40-year veteran of the Federal Reserve System, serving as a member and then vice-chair of the Board of Governors from 2002-2010. He served as an external member of the Financial Policy Committee at the Bank of England from 2011-2021.