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Central Banks - Paradise Lost

Author

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  • Otmar Issing

    (President, Center for Financial Studies, Goethe University Frankfurt (E-mail: issing@ifk-cfs.de))

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 bank fs 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.

Suggested Citation

  • Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:12-e-10
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    File URL: https://www.imes.boj.or.jp/research/papers/english/12-E-10.pdf
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    References listed on IDEAS

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    Cited by:

    1. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    2. Issing, Otmar, 2014. "Monetary policy and balance sheet adjustment," SAFE White Paper Series 15, Leibniz Institute for Financial Research SAFE.
    3. Aleksandra Halka, 2016. "How the central bank’s reaction function in small open economies evolved during the crisis," Bank i Kredyt, Narodowy Bank Polski, vol. 47(4), pages 301-318.
    4. Cukierman, Alex, 2019. "A retrospective on the subprime crisis and its aftermath ten years after Lehman’s collapse," Economic Systems, Elsevier, vol. 43(3).
    5. Cukierman, Alex, 2013. "Monetary policy and institutions before, during, and after the global financial crisis," Journal of Financial Stability, Elsevier, vol. 9(3), pages 373-384.
    6. Eva Zamrazilová, 2014. "Měnová politika: krátkodobá stabilizace versus dlouhodobá rizika [Monetary Policy: Short-Term Stabilization versus Long-Term Risks]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(1), pages 3-31.
    7. Aleksandra Halka, 2015. "Lessons from the crisis.Did central banks do their homework?," NBP Working Papers 224, Narodowy Bank Polski.
    8. Borio, Claudio, 2014. "The financial cycle and macroeconomics: What have we learnt?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 182-198.
    9. Issing, Otmar, 2013. "A new paradigm for monetary policy?," CFS Working Paper Series 2013/02, Center for Financial Studies (CFS).
    10. Cukierman, Alex, 2018. "A retrospective on the subprime crisis and its aftermath ten years after Lehman’s collapse," CEPR Discussion Papers 13373, C.E.P.R. Discussion Papers.
    11. Clément Fontan Fontan & Emmanuel Carré & Guillaume L'Oeillet, 2018. "Theoretical perspectives on the new era of central banking," Post-Print halshs-01866838, HAL.
    12. Remsperger, Hermann, 2013. "Überforderung statt Langeweile?," SAFE White Paper Series 3, Leibniz Institute for Financial Research SAFE.

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    More about this item

    Keywords

    Central banking; Financial stability; Monetary policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets 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

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