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

by Pierre L. Siklos

• ISBN13: 9780521780254
• ISBN10: 052178025X
• Format: Hardcover
• Copyright: 2002-12-09
• Publisher: Cambridge University Press

Summary

Central banks have emerged as the key players in national and international policy making. This book explores their evolution since World War II in 20 industrial countries. The study considers the mix of economic, political, and institutional forces that have affected central bank behavior and its relationship with government. The analysis reconciles vastly different views about the role of central banks in the making of economic policies. One finding is that monetary policy is an evolutionary process. The emphasis on clarity of objectives, transparency of the decision-making process, and a clear understanding of the accountability of the central bank cannot be understood in isolation from the previous 50 years of policy making. The changing face of central banking, born out of the turbulence of the first half of the last century, nurtured by evolution in policies, defines the history of central banking in the second half of the twentieth century.

Table of Contents

List of Figures	xii
List of Tables	xiv
Preface	xvii
The Institutional Make-Up and Evolution of Central Bank--Government Relations: An Introduction	1	(25)
Introduction	1	(2)
Inflation Then and Now	3	(3)
Governing Structures	6	(4)
Conflicts and Conflict Resolution	10	(2)
Objectives and Responsibilities in Monetary Policy: From Experimentation and Autonomy to Accountability and Disclosure	12	(9)
The Central Bank and the State	21	(2)
The Domain of Central Banking	23	(1)
Summary	24	(2)
Legislation Alone Does Not a Central Bank Make: Political Structure, Governance, and Reputation in Monetary Policy	26	(55)
Introduction	26	(1)
Political Structure and Central Bank Autonomy	27	(5)
The Role of Governance and Contracts for Central Bankers	32	(6)
Common Features in Monetary and Fiscal Policies and Indicators of Central Bank Performance	38	(35)
Central Banks and Conflicts with Government	73	(2)
Credibility and Reputation of Monetary Policy	75	(3)
The Fiscal and Monetary Policy Nexus: Do We Need a Central Bank at All?	78	(2)
Summary	80	(1)
Central Bank Personalities and Monetary Policy Performance	81	(47)
Introduction	81	(1)
Legacies of the Past	82	(1)
Friedman's Hypothesis	83	(2)
CEOs of Central Banks	85	(5)
Case Studies	90	(28)
The Threat to Monetary Policy in the Twenty-First Century: Financial Instability	118	(9)
Summary	127	(1)
Econometric Analysis of Central Bank Behavior: An Evolutionary Approach	128	(65)
Introduction	128	(2)
Varieties of Reaction Functions	130	(15)
The Policy Paradox	145	(2)
New Estimates of Central Bank Reaction Functions: Specification and Econometric Considerations	147	(17)
Empirical Evidence	164	(27)
Summary	191	(2)
Contrasting Quantitative and Qualitative Assessments of Central Bank Behavior and the Evolution of Monetary Policies	193	(27)
Introduction	193	(3)
Reconciling the Econometric and Qualitative Evidence	196	(4)
The Emergence of Common Features in Monetary Policy: The Triumph of Policies?	200	(4)
A Half Century of Experimentation	204	(14)
An Assessment	218	(1)
Summary	219	(1)
Accountability, Disclosure, and Conflict Resolution	220	(45)
Introduction	220	(3)
How Much to Talk? Central Bank Signaling and Credibility	223	(4)
The Meaning of Accountability	227	(8)
The Value of Disclosure	235	(3)
The Importance of Conflict Resolution Procedures and Governance	238	(9)
Measuring Central Bank Accountability and Disclosure	247	(17)
Summary	264	(1)
Inflation Targets versus Other Inflation Control Measures: Two Sides of the Same Coin?	265	(35)
Introduction	265	(2)
The End of Personalities and the Emergence of a Framework for Monetary Policy	267	(5)
Exchange Rate Regimes, Money, Inflation, and Targeting: Which One is a Coherent Policy Framework?	272	(10)
Disclosure versus Flexibility Redux	282	(1)
The Appeal of ``Communication'' as an Instrument of Monetary Policy	283	(11)
Communicating Monetary Policy	294	(1)
Practical Issues with Inflation Targets: The Crucial Role of the Institutional Framework	295	(3)
Summary	298	(2)
The Changing Face of Central Banking: Epilogue	300	(9)
Introduction	300	(1)
De Jure or De Facto Autonomy: Does It Matter?	301	(2)
Whither Central Bank Personalities?	303	(1)
Qualitative versus Quantitative Forms of Analysis of Central Bank Performance	304	(2)
Toward the Holy Grail in Monetary Policy?	306	(3)
Bibliography	309	(32)
Index	341