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Central Banks: Past, Present, Future

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  • Angela Redish

    ()

  • Olga Marcela Namen

    ()

Abstract

This paper looks at the question of central bank mandate and design in a larger historical context with the goal of understanding the rationale for the design of the European Central Bank (ECB), and also of developing a better understanding of how central banks will evolve over the next few decades. Over the centuries, central banks have played four broad roles in the economy: fiscal support, financial stability support, monetary support and macroeconomic support. In different periods, different motives have taken pride of place. For example, in western economies the macroeconomic motive dominated after World War II; during the last two decades of the 20th century the monetary stability goal dominated; then in the early 21st century the financial stability role dominated. The mandates of central banks have evolved in response to three factors: the existence of alternative sources of funds for the sovereign, the prevailing economic theory or broader set of philosophical beliefs, and the technology of money and of financial instruments more broadly. All three factors remain in play, and it is likely that central banks will continue to change their colours as their environments change.

Suggested Citation

  • Angela Redish & Olga Marcela Namen, 2012. "Central Banks: Past, Present, Future," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(67), pages 14-35, July.
  • Handle: RePEc:bdr:ensayo:v:30:y:2012:i:67:p:14-35
    DOI: 10.32468/Espe.6701
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    References listed on IDEAS

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    1. Bordo, Michael D. & Redish, Angela, 1987. "Why Did the Bank of Canada Emerge in 1935?," The Journal of Economic History, Cambridge University Press, vol. 47(2), pages 405-417, June.
    2. Michael D. Bordo & Angela Redish, 1990. "Credible Commitment and Exchange Rate Stability: Canada's Interwar Experience," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 357-380, May.
    3. Caroline M. Betts & Michael D. Bordo & Angela Redish, 1996. "A Small Open Economy in Depression: Lessons from Canada in the 1930s," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 1-36, February.
    4. Bordo, Michael D. & Rockoff, Hugh & Redish, Angela, 1994. "The U.S. Banking System From a Northern Exposure: Stability versus Efficiency," The Journal of Economic History, Cambridge University Press, vol. 54(2), pages 325-341, June.
    5. Michael Bordo & Tamara Gomes & Lawrence Schembri, 2010. "Canada and the IMF: Trailblazer or Prodigal Son?," Open Economies Review, Springer, vol. 21(2), pages 309-333, April.
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    More about this item

    Keywords

    Central banks; fiscal support; financial stability support; monetary support; macroeconomic support;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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