The case for diversity and inclusion in central banks is clear. As public institutions, they need to better reflect the societies they serve. Doing so reinforces their credibility and enhances their legitimacy. Central bank leaders recognise that welcoming diverse views at the table leads to improved policy outcomes. Economist John Maynard Keynes got it exactly right when he said, ‘It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics.’
There are two examples at the Bank of Canada that illustrate perfectly the benefits of diversity and inclusion for policy-makers.
First, several central banks have embarked on strategic reviews of their policy frameworks. These require taking into account lessons from the 2008 financial crisis and its aftermath, and the seismic shifts taking place in these institutions’ economies and broader societies.
The Bank of Canada has undertaken such reviews every five years since it implemented inflation targeting nearly 30 years ago. Our current review culminates in 2021. It consists of a side-by-side comparison of inflation targeting against alternative frameworks. We are also strengthening our monetary policy toolkit and studying the interactions among monetary, macroprudential and fiscal policies.
An ambitious review requires inclusive consultations. It shouldn’t be too technical, excessively academic, or appear irrelevant to a broad set of stakeholders. After all, our policies affect everyone in our society.
With that in mind, we are engaging with a much wider range of interests, from students to seniors, from poverty advocates to labour representatives. Their input is already impacting our work.
We have added an area of research that is, in many ways, elemental – seeking to better understand how different segments of society perceive the dynamics of inflation. While we target the consumer price index, individuals experience inflation differently. For young people, housing and education costs matter most. For older Canadians, healthcare costs are of particular concern. And for indigenous peoples, the high levels of prices in remote communities pose much greater challenges than any year-on-year price increases.
Indirectly, these deeper and broader interactions have added a richer lens to our policy-making. Regardless of the results of our 2021 review, we will be better positioned to incorporate more perspectives into the day to day conduct of monetary policy.
Second, the BoC is carrying out world-leading research in financial technology, most notably studying a central bank digital currency. This requires a multi-disciplinary approach involving, among others, economists, data scientists, experts in computer-human interaction, software and hardware developers, and payments experts. It combines theory with practical reality, enriching our research and challenging our thinking at every step. However, top quality work requires more than calling on diverse expertise. We strive to ensure a meaningful voice at the table for people of diverse identities, backgrounds and life experiences.
Moving forward, there is a need to broaden this engagement. We must reach out to the payments systems community, the financial sector and the design community. But we also need to understand the perspectives of poverty groups, remote communities, and those with limited access to the financial system.
Diversity and inclusion matter. For central bankers, these can translate to richer discussions, better outcomes, and greater accountability to the citizens we serve.
Carolyn Wilkins is Senior Deputy Governor of the Bank of Canada. This article originally appeared in the OMFIF Gender Balance Index, which is available to download here.