Central Banks Should Look Abroad For Talent

(Bloomberg View) -- Britain has long stood accused of being run by a small clique of privately educated aristocrats. At least in one sphere the accusation is unfair: Few countries are so open-minded when it comes to appointing the men and women who take some of the most crucial decisions for the future of the economy.

The Bank of England's rate-setting monetary policy committee is a true melting pot of global talent. On Monday, the U.K. government  chose Silvana Tenreyro, a monetary and trade economist at the London School of Economics, as an external member of the nine-strong MPC. Tenreyro holds Argentine, Italian and British citizenships, received her PhD in economics from Harvard and worked as a rate-setter for the Central Bank of Mauritius, making her a true "citizen of the world."

The MPC is already rife with economists who come from abroad. The governor, Mark Carney, was born in Canada where he also headed the central bank. Gertjan Vlieghe, another external MPC member, grew up in Belgium before moving to the U.K. Tenreyro's predecessor, Kristin Forbes, is a U.S. citizen who will now return to teach in America. Unlike Carney and Vlieghe, who both became British nationals, Forbes never swore allegiance to the Queen.

Among the world's leading central banks, the Bank of England is pretty unique in this regard. The Bank of Japan's policy board is entirely made up of economists from Japan. In the euro zone, monetary policy is strictly the preserve of European policy-makers. The top brass at the Bundesbank, the Bank of France and the Bank of Italy are almost entirely made up of economists who grew up in Germany, France and Italy. On the U.S. Federal Reserve, deputy governor Stanley Fischer, who spent his childhood and adolescence in Africa and Israel and holds both U.S. and Israeli nationalities, is a rare exception on the board of governors.

There is much to be said in favor of having some foreigners in charge of a country's monetary policy. Central banks are highly technical institutions so fishing from the widest talent pool can only be a good thing. More than just widening the recruitment net, though, having economists from different parts of the world can limit the risk of group-think and expand the range of experiences to draw on when setting policy. In the aftermath of the global financial crisis, Adam Posen, an American economist, was among the most forceful proponents on the MPC of an activist monetary policy to support growth and inflation. This year Forbes became one of the committee's leading hawks, as the first member to vote for an increase in interest rates in dissent with the majority.

Of course, the Bank of England could still do with more diversity at its top. After the resignations of Charlotte Hogg and Minouche Shafik, Threadneedle Street does not have any women among its governors and Tenreyro will be the only female member of the MPC. The appointment of a successor to Hogg as deputy governor for markets and banking is an excellent opportunity to make the bank less male-dominated.

Still, the global diversity at the top of the Bank of England is an asset that should not be taken for granted. As Britain leads the way, other central banks should follow.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Ferdinando Giugliano writes columns and editorials on European economics for Bloomberg View. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times. 

To contact the author of this story: Ferdinando Giugliano at fgiugliano@bloomberg.net.

To contact the editor responsible for this story: Therese Raphael at traphael4@bloomberg.net.

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