FOMC Responses to Calls for Transparency

I apply latent semantic analysis to Federal Open Market Committee (FOMC) transcripts and minutes from 1976 to 2008 in order to analyze the FOMC’s responses to calls for transparency. Using a newly constructed measure of the transparency of deliberations, I study two events that define markedly different periods of transparency over this 32-year period. First, the 1978 Humphrey-Hawkins Act increased the degree to which the FOMC used meeting minutes to convey the content of its meetings. Historical evidence suggests that this increased transparency reflected a response to the Act’s requirement that the Fed provide greater detail in reporting with respect to its goals and objectives. Second, the 1993 decision to publish nearly verbatim transcripts also increased transparency. However, the cost was an increasing degree of conformity at each meeting, as evidenced by lower variance in content disagreement at the member level.