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The Mayekawa Lecture: Central Banks-Paradise Lost

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  • Otmar Issing

    (Goethe University Frankfurt)

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    Abstract

    The focus of the paper is to analyze how the concept behind central bank policy developed over time and how the recent financial crisis and its consequences will have an influence. While the principles of the institutional arrangement for central banks (independence, clear mandate, prohibition of monetary financing) are relevant as ever, pre- crisis consensus strategies of monetary policy have been revealed as flawed. The close monitoring of money and credit developments, a key lesson to be drawn from the crisis, however, does not imply the extension of the central bankfs mandate to financial stability. As much as central banks should demonstrate modesty in what they deliver, equally their reputation should not be challenged further by other tasks imposed upon them.

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    File URL: http://www.imes.boj.or.jp/research/papers/me30-4.pdf
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    Bibliographic Info

    Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

    Volume (Year): 30 (2012)
    Issue (Month): (November)
    Pages: 55-74

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    Handle: RePEc:ime:imemes:v:30:y:2012:p:55-74

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    Keywords: Central banking; Financial stability; Monetary policy;

    References

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    1. Claudio Borio, 2011. "Central banking post-crisis: What compass for uncharted waters?," BIS Working Papers 353, Bank for International Settlements.
    2. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
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    8. Vasco Cúrdia & Michael Woodford, 2009. "Credit Spreads and Monetary Policy," Discussion Papers 0910-01, Columbia University, Department of Economics.
    9. Charles Goodhart, 2010. "The changing role of central banks," BIS Working Papers 326, Bank for International Settlements.
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    11. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
    12. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-45, December.
    13. Claudio Borio, 2009. "Ten propositions about liquidity crises," BIS Working Papers 293, Bank for International Settlements.
    14. Goodfriend, Marvin, 2011. "Central banking in the credit turmoil: An assessment of Federal Reserve practice," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 1-12, January.
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    16. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
    17. Bagehot, Walter, 1873. "Lombard Street: A Description of the Money Market," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number bagehot1873.
    18. Issing,Otmar, 2008. "The Birth of the Euro," Cambridge Books, Cambridge University Press, number 9780521516730.
    19. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521788885.
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    22. Charles Goodhart, 2010. "The Changing Role of Central Banks," FMG Special Papers sp197, Financial Markets Group.
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    Cited by:
    1. Otmar Issing, 2013. "A New Paradigm for Monetary Policy?," International Finance, Wiley Blackwell, vol. 16(2), pages 273-288, 06.
    2. Issing, Otmar, 2013. "A new paradigm for monetary policy?," CFS Working Paper Series 2013/02, Center for Financial Studies (CFS).

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