The Changing Face of Central Banking: Evolutionary Trends since World War II

Cover......Page 1
Half-title......Page 3
Series-title......Page 5
Title......Page 7
Copyright......Page 8
Dedication......Page 9
Contents......Page 11
Figures......Page 14
Tables......Page 16
Preface......Page 19
INTRODUCTION......Page 23
INFLATION THEN AND NOW......Page 25
GOVERNING STRUCTURES......Page 28
CONFLICTS AND CONFLICT RESOLUTION......Page 32
OBJECTIVES AND RESPONSIBILITIES IN MONETARY POLICY: FROM EXPERIMENTATION AND AUTONOMY TO ACCOUNTABILITY AND DISCLOSURE......Page 34
THE CENTRAL BANK AND THE STATE......Page 43
THE DOMAIN OF CENTRAL BANKING......Page 45
SUMMARY......Page 46
INTRODUCTION......Page 48
POLITICAL STRUCTURE AND CENTRAL BANK AUTONOMY......Page 49
THE ROLE OF GOVERNANCE AND CONTRACTS FOR CENTRAL BANKERS......Page 54
The Role of Fiscal Policy......Page 58
A Brief Detour to the Antipodes......Page 59
COMMON FEATURES IN MONETARY AND FISCAL POLICIES AND INDICATORS OF CENTRAL BANK PERFORMANCE......Page 60
Inflation and Inflation Persistence......Page 61
Credibility of Policy Regimes......Page 69
Caveats......Page 75
Interest Rates......Page 80
Central Bank Independence......Page 86
Real Economic Performance......Page 91
CENTRAL BANKS AND CONFLICTS WITH GOVERNMENT......Page 95
CREDIBILITY AND REPUTATION OF MONETARY POLICY......Page 97
THE FISCAL AND MONETARY POLICY NEXUS: DO WE NEED A CENTRAL BANK AT ALL?......Page 100
SUMMARY......Page 102
INTRODUCTION......Page 103
LEGACIES OF THE PAST......Page 104
FRIEDMAN’S HYPOTHESIS......Page 105
CEOs OF CENTRAL BANKS......Page 107
CASE STUDIES......Page 112
The Fed and the Tension between Personalities and Policies......Page 113
The Bank of Canada and the Directive......Page 122
The “Directive” in International Perspective......Page 128
The Bundesbank and the Preeminence of Policy......Page 131
Drawing Some Conclusions......Page 137
THE THREAT TO MONETARY POLICY IN THE TWENTY-FIRST CENTURY: FINANCIAL INSTABILITY......Page 140
Varieties of Shortsightedness in Monetary Policy......Page 145
SUMMARY......Page 149
INTRODUCTION......Page 150
VARIETIES OF REACTION FUNCTIONS......Page 152
Characterizing the Reaction Function......Page 155
Identifying the Central Bank’s Preferences......Page 158
Discretion in the Form of a Rule......Page 161
THE POLICY PARADOX......Page 167
Motivation......Page 169
Specification of the Forecast Function......Page 173
Specification of the Reaction Function......Page 178
Some Stylized Features of the Data......Page 186
Reaction Functions for Individual Countries......Page 191
Extensions to Basic Reaction Function Estimates......Page 197
Cross-Country Reaction Function Estimates......Page 206
SUMMARY......Page 213
INTRODUCTION......Page 215
RECONCILING THE ECONOMETRIC AND QUALITATIVE EVIDENCE......Page 218
THE EMERGENCE OF COMMON FEATURES IN MONETARY POLICY: THE TRIUMPH OF POLICIES?......Page 222
A HALF CENTURY OF EXPERIMENTATION......Page 226
Exchange Rate Pressure......Page 227
Fiscal Pressure......Page 232
Political Pressure......Page 237
AN ASSESSMENT......Page 240
SUMMARY......Page 241
INTRODUCTION......Page 242
HOW MUCH TO TALK? CENTRAL BANK SIGNALING AND CREDIBILITY......Page 245
THE MEANING OF ACCOUNTABILITY......Page 249
THE VALUE OF DISCLOSURE......Page 257
THE IMPORTANCE OF CONFLICT RESOLUTION PROCEDURES AND GOVERNANCE......Page 260
Governance and Central Bank Accountability......Page 262
MEASURING CENTRAL BANK ACCOUNTABILITY AND DISCLOSURE......Page 269
Indexes of Accountability and Disclosure......Page 278
Inflation Forecasts and Central Bank Communication Redux......Page 282
SUMMARY......Page 286
INTRODUCTION......Page 287
THE END OF PERSONALITIES AND THE EMERGENCE OF A FRAMEWORK FOR MONETARY POLICY......Page 289
Exchange Rate Regimes......Page 294
Money Growth Targets......Page 298
Inflation Targeting......Page 300
DISCLOSURE VERSUS FLEXIBILITY REDUX......Page 304
THE APPEAL OF “COMMUNICATION” AS AN INSTRUMENT OF MONETARY POLICY......Page 305
The Importance of Forecasts......Page 311
COMMUNICATING MONETARY POLICY......Page 316
PRACTICAL ISSUES WITH INFLATION TARGETS: THE CRUCIAL ROLE OF THE INSTITUTIONAL FRAMEWORK......Page 317
SUMMARY......Page 320
INTRODUCTION......Page 322
DE JURE OR DE FACTO AUTONOMY: DOES IT MATTER?......Page 323
WHITHER CENTRAL BANK PERSONALITIES?......Page 325
QUALITATIVE VERSUS QUANTITATIVE FORMS OF ANALYSIS OF CENTRAL BANK PERFORMANCE......Page 326
TOWARD THE HOLY GRAIL IN MONETARY POLICY?......Page 328
Bibliography......Page 331
Index......Page 363