SPRING EXERCISE at the end of her first year at HKS was about an imaginary smallpox epidemic, and Sarah Bell MPP 2003 was her team’s lead on the economic impact assessment. Nearly two decades on, Bell’s career in central banking has seen her weather a few more (real) crises—including Puerto Rico’s banking crisis in the mid-2000s and the financial meltdown of 2008. Now at the Bank for International Settlements (BIS) in Switzerland, a bank for central banks that also acts as a forum for member central banks to cooperate and discuss developments in the world economy and financial markets, she’s dealing with perhaps the greatest crisis yet—the global pandemic and the economic contraction that has followed in its wake.
Q. What sparked your interest in public service?
When I was growing up in Texas, my parents were in different ways involved in public service. My mother ran a nonprofit for her whole career; most recently, before retirement, she was the director of Meals on Wheels in San Antonio. My dad is a doctor in a rural part of the state who has also worked in tropical medicine. I always knew I wanted to be in public service. But I always thought I wanted to do it at the macroeconomic level rather than the community level.
Q. How did you get into central banking?
As an undergraduate, I studied politics and economics, and I was focused on economic development—in Africa in particular. When I got to the Kennedy School, I thought I was going to concentrate on economic development. But I took courses on regulation and markets, and I got more interested in those topics. One memorable class on financial markets and institutions included a field trip to the Federal Reserve. After that visit, I was kind of hooked. I did a summer internship at the New York Fed and then spent 15 years working there, including the last few years as chief of staff, before coming to the BIS where I am currently the adviser to the general manager. This role gives me a broad view of activities across the BIS and in the central banking community. What I got out of my experience at the Kennedy School more broadly, though, was training in how to think about policy decisions in the context of a high degree of uncertainty. That has definitely been a theme for me through my career.
Q. What has your experience taught you?
One of the important lessons is the need to seek out and incorporate diverse and multidisciplinary perspectives to provide a robust framework for policymaking in a time of great uncertainty. Economists dive deep into analysis of situations with a certain approach, but central banks also need to consider a broad set of perspectives on a host of issues related to financial markets, public communications legal issues and social impact. When time is of the essence, you have to think about how to frame these considerations in a comprehensive way to be able to act decisively. I think the difficulty of that can’t be underestimated— you have to accept a certain threshold for potential failure. With hindsight, there were things we policymakers could have done better in the last financial crisis. But it was really important that the leaders at that time were ambitious and motivated to act quickly, as they are now.
Another big lesson I took from that period—and I guess more so from the period that followed—was the importance of communication to the public. The Fed wasn’t as accustomed to communicating as frequently and transparently as it is now. That was a big lesson for policymakers at the time—the importance of not only doing what you’re doing, but at the same time explaining it clearly to the general public. I think central banks all around the world have moved in that direction of greater transparency, and that’s been an amazing development.
Q. What do you think is the role of central banks in this moment of crisis?
Central banks are in a unique position right now, because in many ways they can act more quickly than fiscal authorities can. They have the operational capabilities to stand up facilities rapidly, particularly given the experience in the last crisis. So it has been incumbent on them to come out with unprecedented measures to support the flow of credit. And that’s been an essential role in the first stage of the pandemic. Less urgently perhaps but just as important, central banks also have a role to play in pointing out systemic vulnerabilities that have emerged in the wake of the crisis and calling for those risks to be addressed.
Photos courtesy of Sarah Bell