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The development of monetary policy in the 20th century – some reflections

Listed author(s):
  • Otmar Issing

    ()

    (Center for Financial Studies, Frankfurt am Main)

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    In this paper I outline – from a practitioner’s as well as from a researcher’s perspective – several of the key developments that took place during the last century in monetary policy. In particular, I describe how the monetary system evolved from gold standard, prevailing throughout most of the last century, to paper money and how the norm in central banking changed from pure discretion after World War II to transparency and independence. I furthermore analyze how the exchange rate regime under Bretton-Woods impacted on countries’ monetary policy and, with a focus on Europe, how European Monetary Union (EMU) emerged from the European Monetary System (EMS). I then outline today’s relatively broad consensus on monetary policy and how it developed from a learning process on the side of central banks and important contributions from research. Finally, after arguing that the ECB’s monetary policy which fruitfully combines past experience and current research is a successful and promising approach, I outline some challenges lying ahead

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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp186en.pdf
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    Paper provided by National Bank of Belgium in its series Working Paper Research with number 186.

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    Length: 32 pages
    Date of creation: Apr 2010
    Handle: RePEc:nbb:reswpp:201004-01
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    2. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
    3. Issing,Otmar, 2008. "The Birth of the Euro," Cambridge Books, Cambridge University Press, number 9780521516730, December.
    4. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    7. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    8. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
    9. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    10. Christina D. Romer & David H. Romer, 2002. "The Evolution of Economic Understanding and Postwar Stabilization Policy," NBER Working Papers 9274, National Bureau of Economic Research, Inc.
    11. Svensson, Lars O, 2005. "Monetary Policy with Judgment: Forecast Targeting," MPRA Paper 819, University Library of Munich, Germany.
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    13. Olivier Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 199-215, 09.
    14. Ehrmann, Michael & Tzamourani, Panagiota, 2009. "Memories of high inflation," Working Paper Series 1095, European Central Bank.
    15. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521783248, December.
    16. Otmar Issing, 2005. "Why did the Great Inflation not happen in Germany?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 329-336.
    17. Otmar Issing, 2006. "Europe’s hard fix: the Euro area," International Economics and Economic Policy, Springer, vol. 3(3), pages 181-196, December.
    18. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
    19. Otmar Issing, 2006. "Europe’s Hard Fix: The Euro Area," Working Papers 120, Oesterreichische Nationalbank (Austrian Central Bank).
    20. Barbara Roffia & Andrea Zaghini, 2007. "Excess Money Growth and Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 241-280, December.
    21. Tobias Adrian & Hyun Song Shin, 2009. "Prices and Quantities in the Monetary Policy Transmission Mechanism," International Journal of Central Banking, International Journal of Central Banking, vol. 5(4), pages 131-142, December.
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    23. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    24. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44, pages 1-1.
    25. Bindseil, Ulrich, 2004. "Monetary Policy Implementation: Theory, past, and present," OUP Catalogue, Oxford University Press, number 9780199274543.
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    27. DETKEN Carsten & SMETS Frank, "undated". "Asset Price Booms and Monetary Policy," EcoMod2003 330700042, EcoMod.
    28. Andreas Beyer & Vitor Gaspar & Christina Gerberding & Otmar Issing, 2008. "Opting Out of the Great Inflation: German Monetary Policy After the Break Down of Bretton Woods," NBER Working Papers 14596, National Bureau of Economic Research, Inc.
    29. Allan H. Meltzer, 2005. "Origins of the Great Inflation," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 145-176.
    30. Otmar Issing, 2009. "Asset Prices and Monetary Policy," Cato Journal, Cato Journal, Cato Institute, vol. 29(1), pages 45-51, Winter.
    31. Angel J. Ubide & Kevin Ross, 2001. "Mind the Gap; What is the Best Measure of Slack in the Euro Area?," IMF Working Papers 01/203, .
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    40. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    41. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
    42. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, September.
    43. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece.
    44. Claudio E. V. Borio & Philip Lowe, 2004. "Securing sustainable price stability: should credit come back from the wilderness?," BIS Working Papers 157, Bank for International Settlements.
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