Why is Social Media the Last Pillar for Central Banks to Redefine the World Economy?
Social media is becoming an important medium of communication for central banks around the world.
Central banks around the world are standing confused on Instagram with wellness influencers, makeup professionals, and home cooks as they focus more and more on their social media platforms to convey their messages. Social media platforms such as Facebook and Twitter are still the financial authorities’ favorite social media channels, but Instagram usage has increased significantly over the past year.
Bank of Indonesia, which has about 700,000 followers (as of April 28), is the central bank with the most followers on Instagram. The Federal Reserve Bank of Chicago is the most followed US financial institution with 7,398 followers. Communication with the public will be tested this year as central banks are trying to guide the global economy through historic inflation surges. Policymakers on social media platforms are trying to reach younger audiences, but they are not without risk.
Young people tend to be quite impatient, so if the central banks need to send a very short message from a former Bank of Japan board member, this can be either completely misleading or it will be quite influential. However, the way most banks are using Instagram is very different. Indonesia posts multiple times a day, including how to avoid online scams and how to target users with their favorite coffee brand. The Central Bank of Brazil’s Instagram provides information such as “Calm Down! Central Bank pays fines and avoids reckless spending during holiday sales.”
The Central Bank of Venezuela, on the other hand, has taken a more realistic approach, publishing only major exchange rates once a day. Increasing public involvement through social media is not completely risk-free for central banks. Your online presence needs to be carefully curated to avoid the reactions that the Federal Reserve Bank of St. Louis encountered when it was too far from the territory of financial authorities.
The Federal Reserve Bank of St. Louis tweeted in preparation for Thanksgiving last November, suggesting that soy-based vegetarian dinners are cheaper and more protein-rich than traditional turkey dinners. The backlash was rapid and angry comments suggested that no one wanted nutritional advice from the Reserve Bank. Central banks have to be so complex, technical, and subtle, that a complete explanation rarely fits in one tweet. There is also the risk of oversimplification or misunderstanding for clarity.
An example of the most successful use of social media by central banks is showcased by the Central Bank of Jamaica. In 2019, policymakers there responded to criticisms of inadequate public communication by becoming viral and releasing a series of reggae music videos explaining changes in the country’s monetary policy.
After Instagram, the next frontier for these central banks might be the short-video app TikTok. Again, the Bank of Indonesia is ahead of the competition. It began earlier this month with a video promoting Indonesia’s potential as an Islamic financial hub and a comedy sketch on how to pay parking fees online.
The central banks’ transition from a dry talk at the Chamber of Commerce lunch to communication via social media is clearly positively increasing transparency and promoting understanding of what policymakers on social media are doing. Links to Twitter feeds make it much easier for everyone to catch up with the latest central bank ideas, without digging into the tedious websites for the general public, as well as those of us who follow the central bank for a living.