The changing role of central banks
Although central banks have pursued the same objectives throughout their existence, primarily price and financial stability, the interpretation of their role in doing so has varied. We identify three stable epochs, when such interpretations had stabilised, i.e. the Victorian era, 1840s–1914; the decades of government control, 1930s–60s; the triumph of the markets, 1980s–2007. Each epoch was followed by a confused interregnum, searching for a new consensual blueprint. The final such epoch concluded with a crisis, when it became apparent that macro-economic stability, the Great Moderation, plus (efficient) markets could not guarantee financial stability. So the search is now on for additional macro-prudential (counter-cyclical) instruments. The use of such instruments will need to be associated with controlled variations in systemic liquidity, and in the balance sheet of the central bank. Such control over its own balance sheet is the core, central function of any central bank, even more so than its role in setting short-term interest rates, which latter could be delegated. We end by surveying how relationships between central banks and governments may change over the next period.
Volume (Year): 18 (2011)
Issue (Month): 02 (August)
|Contact details of provider:|| Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK|
Web page: http://journals.cambridge.org/jid_FHR
When requesting a correction, please mention this item's handle: RePEc:cup:fihrev:v:18:y:2011:i:02:p:135-154_00. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.