Economic Rationales for Central Banking: Historical Evolution, Policy Space, Institutional Integrity, and Paradigm Challenges
AbstractThe late-2000s global financial crisis saw increased public profiles and balance sheets of both the US and European central banks, their combined series of financial rescue measures in effect pushing the envelope of central banking modus operandi. And in general, somewhat anecdotally amongst non-crisis Asia-Pacific/emerging economies, central banks are under increased pressure to pursue growth agenda, or at least being publicly called to task as to whether strict inflation regime is all that necessary. All the while, orthodox economics appear to be bursting at the seams, as the world witnesses extreme financial-capital market events increasingly becoming the ‘new normal’, globalised banking system portending knife-edged stability dynamics consistent with high degree of epidemic, network-like systemic interconnectivities, and global catastrophe phenomena reflecting energy/ecological/environmental imbalances more and more frequently materialising as economic disequilibria. Taken together, it is only becoming more difficult to reconcile historical evolution of central banks (the institutions) and central banking (the mandate) with ever mounting stabilisation policy demands and global ‘mega-trend’ challenges over the next decades. This essay details our positive and normative analysis and posits our conceptual arguments concerning the very essence of central banks (the institutions) and central banking (the discipline). We begin with Historical Evolution, from the genesis of early ‘proto’ central banks to the emergence of modern consensus on central banking. Stylised facts and conceptual schemas drawn from that exercise then enables us to formulate the notion of Policy Space as a generalization of central bank role and responsibility. We then employ economic rationales to argue for and advocate key elements and principles in terms of Institutional Integrity as an imperative foundation for the pursuit of policy goals. The emerging evolutionary perspective also compels us to postulate a number of Paradigm Challenges facing current and future generations of central bankers.
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Bibliographic InfoPaper provided by Economic Research Department, Bank of Thailand in its series Working Papers with number 2012-04.
Length: 82 pages
Date of creation: Apr 2012
Date of revision:
Economic Rationales for Central Banking;
Find related papers by JEL classification:
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-08 (All new papers)
- NEP-CBA-2013-02-08 (Central Banking)
- NEP-HIS-2013-02-08 (Business, Economic & Financial History)
- NEP-HME-2013-02-08 (Heterodox Microeconomics)
- NEP-HPE-2013-02-08 (History & Philosophy of Economics)
- NEP-MON-2013-02-08 (Monetary Economics)
- NEP-SEA-2013-02-08 (South East Asia)
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