International aspects of central banking: diplomacy and coordination

This chapter discusses the evolution of central bank interactions since the early 1970s. Today, central banks have more forums in which they interact without finance ministries than they did in earlier times; interactions have shifted away from managing exchange rates and toward monitoring and regulating the international financial system, global financial institutions, and cross-border capital flows. At the same time, the rise in statutory independence has given central banks more authority to shape the response to events, and the rise of new powers and their integration in markets has resulted in the broadening out of the prominent coordinative groupings to include countries outside the historically traditional major powers. Our main conclusion is that the relationship-building that is inherent in multilateral interaction has provided a springboard for coordination in times of stress or crisis. Crises matter—they can be turning points in terms of the actions taken and the countries included in the dialogue.