Central Banks in Parliaments

This paper investigates whether parliamentary hearings are effective in holding central banks accountable against their mandates. To this end, it applies text analysis on the hearings of the Bank of England, the European Central Bank and the Federal Reserve from 1999 to 2019. It finds that central bank objectives play a crucial role in determining the topic of the hearings. It also shows that sentiments are more negative when the distance between inflation and the central bank’s inflation aim increases. These results suggest that parliamentary scrutiny serves its intended purpose. However, topics and sentiment react more to inflationary rather than deflationary deviations of inflation away from target.