The Over-Burdened Central Bank and the Shift Away from Autonomy

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Forward Guidance ◽  
Self Assessments ◽  
Crisis Conditions ◽  
Central Bankers ◽  
Influence Behavior

Many central banks took on additional responsibilities. Inadequate self-assessments remain unfinished almost a decade after the crisis erupted. Government-central bank relationships need to be conditioned on whether times are normal versus crisis conditions. Transparency confronts ambiguity when central banks must communicate the outlook and the conditionality of their decisions. Forward guidance was taken too far and ended up being futile. Central bankers simply exhausted their ability to influence behavior through mere words or ambiguous statements. This is a self-inflicted wound for institutions that are seen as overburdened. These forces leave central banking more vulnerable than is commonly acknowledged. Squaring the conventional objectives of monetary policy with the unclear aims of financial stability is difficult. Adequate limitations on the authority of central banks have yet to be thoroughly debated. We are nowhere near resolving the inherent tensions between old and new sets of central bank objectives.

Modern Central Banking

2019 ◽  
pp. 573-601
Author(s):  
Frederic S. Mishkin
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Empirical Evidence ◽  
Financial Stability ◽  
New World ◽  
Central Banks ◽  
Central Banking ◽  
Scientific Principles ◽  
Brave New World ◽  
Almost All

This chapter examines how central banking has evolved in recent decades by looking at two main areas of central bank activities: monetary policy and financial stability policy. It starts by describing a set of nine basic scientific principles derived from theory and empirical evidence that now guide thinking at almost all central banks, which is referred to as the science of central banking. Then the essay discusses how the science of monetary policy provides a framework for understanding central bank governance and how modern central banks conduct monetary and financial stability policies. Central banking has entered a brave new world in which challenges have become greater and the conduct of policy has become more complex.

scholarly journals CENTRAL BANK DIGITAL CURRENCY: ECONOMIC AND LEGAL CHARACTERISTICS

2019 ◽  
pp. 94-100
Author(s):  
T.S. Hudima ◽  
V.A. Ustymenko
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Banking System ◽  
Legal Framework ◽  
Central Banks ◽  
Digital Currency ◽  
Business Entities ◽  
The Right ◽  
Article 5

The article is devoted to identifying the peculiarities of the central bank digital currency (CBDC), explaining their impact on the monetary policy of the state, and identifying the prospects for the transformation of domestic banking legislation in connection with the implementation of the CBDC. It is noted that the scope of competence of the Central Bank and the legal basis for the issuance of the CBDC will depend on the economic and legal features of the digital currency, the degree of its impact on the monetary policy, the financial stability of the country’s economy and so on. In the process of forming the appropriate legal field and defining the conceptual apparatus in the sphere of emission and circulation of the CBDC, the peculiarities of the use of the latter in economic transactions and the specific functions not inherent in ordinary means of payment should be taken. СBDC initiatives will help: 1) progressively narrow the banking system at the level of the Central Banks (such as the Chicago Plan) by allowing individuals and businesses to deposit directly into the accounts of the Central Banks; 2) increasing confidence of economic entities and individuals in the financial system; 3) strengthening the financial stability of the economy (both domestically and globally). Granting business entities or individuals the right to store digital money directly with the Central Bank can give rise to two main directions of influence on monetary policy: first, to strengthen its transmission mechanism; secondly, lead to banks being disrupted. This may lead to some legal issues regarding (1) the NBU’s area of competence; (2) the constitutional foundations of the legal economic order (Article 5 of the ECU). In particular, it cannot be ruled out that centralization of the production, servicing, and management of the СBDC turnover may violate the principles of competition in business activities, prevent abuse of monopoly position in the market, etc. Keywords: monetary policy, central bank digital currency, financial stability, competence, legal framework, economic operations, issue.

Putting the Program into Action, 1920–1928

2016 ◽  
Author(s):  
Simon James Bytheway ◽  
Mark Metzler
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Ad Hoc ◽  
Central Banks ◽  
Financial Globalization ◽  
International Network ◽  
Bank Of England ◽  
International Monetary Policy ◽  
Central Bankers

This chapter details how Montagu Norman of the Bank of England, in partnership with Benjamin Strong of the FRBNY, turned ad hoc wartime cooperation into a formal agenda. The paired ideas that national central banks should be autonomous, and that they should cooperate with each other, were first spelled out in a private “manifesto” that Norman circulated among fellow central bankers in 1921. Central bank cooperation was internationally recognized as a principle at the 1922 Genoa Conference, and it was also put into practice. Cooperation between central banks began primarily as informational cooperation, which includes not only the sharing of information but also the sharing and propagation of worldviews. An international network of central banks thus developed out of the war, as did the world's first truly coordinated system of international monetary policy. In these and other ways, financial globalization surged to a new level in the 1920s.

Moderation Before the Storm

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Balance Sheet ◽  
Central Banks ◽  
Central Banking ◽  
Financial Indicators ◽  
Policy Strategy ◽  
Central Bank Communication ◽  
Current State ◽  
Macroeconomic Environment

This chapter provides an overview of the macroeconomic environment since 2000. The era is broken down into three periods: 2000–2006, 2007–2010, and 2011–present. Warnings of an imminent crisis were present before 2007, but generally they were ignored by self-satisfied policymakers. Pre-crisis, inflation control was the once rising and, seemingly, preeminent monetary policy strategy. A review, both pre- and post-GFC, of a wide variety of macroeconomic and financial indicators is included, with discussion of lesser known variables such as proxies for central bank communication and balance sheet indicators. These clearly enable us to identify interventions by central banks while also highlighting areas of continuing concern. In some respects (e.g. concerns about financial stability), everything has changed post-crisis, but in other respects (e.g. monetary policy strategy) fewer changes are apparent. The chapter concludes by arguing that there are reasons to be apprehensive about the current state of monetary policy and central banking.

scholarly journals A new paradigm of modern central banking

2013 ◽  
Vol 2 (2) ◽  
pp. 75-78
Author(s):  
Aleksandra Szunke
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Central Banking ◽  
First Century ◽  
Financial Instability ◽  
New Paradigm ◽  
The Global Financial Crisis

The changes in the modern monetary policy, which took place at the beginning of the twenty-first century, in response to the global financial crisis led to the transformation of the place and the role of central banks. The strategic aim of the central monetary institutions has become preventing financial instability. So far, central banks have defined financial stability as a public good, which took care independently of other monetary purposes (Pyka, 2010). Unconventional monetary policy resulted in changes the global central banking. The aim of the study is to identify a new paradigm of the role and place of the central bank in the financial system and its new responsibilities, aimed at countering financial instability.

Central Banking before the Great Recession

2018 ◽  
Author(s):  
Francesco Papadia ◽  
Tuomas Vӓlimӓki
Keyword(s):  
Central Bank ◽  
Great Recession ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Price Stability ◽  
Great Moderation ◽  
The Great Recession ◽  
Advanced Economies ◽  
The Interest Rate

The chapter describes the historical process as well as the analytical and empirical factors that, at the end of the twentieth century, led to the dominance, in advanced economies, of a central bank model based on an independent institution devoted to price stability as its overriding objective. The central bank pre-crisis model was elegant, performing, and efficient. However, it could not easily accommodate the pursuit of a traditionally important central bank objective: financial stability. Indeed, since central banks have, in essence, just one tool, that is, the interest rate, the pursuit of a financial stability objective in addition to a price stability objective could create dilemma situations. In the two decades between the mid-1980s and the mid-2000s, the economies of advanced economies were very stable, and this period was thus identified as Great Moderation. However, subsequent experience showed that, in this period, the crisis was incubating.

Central Bank Planning

2018 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Practical Reasoning ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers until recently drew a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralized knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy further into the future, these unconventional policies nevertheless mark a structural break—the return of hydraulic macroeconomic state agency, refashioned for a financialized economy. This chapter analyses the theoretical and practical reasoning behind this shift in the governability paradigm and examines the epistemic and reputational costs of modern central bank planning and the non-market setting of long-term bond prices.

Digital currencies hold much promise for central banks

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Central Banks ◽  
Content Type ◽  
Emerging Nations ◽  
Or Groups ◽  
Potential Applications ◽  
Digital Money ◽  
The Cost

Subject Central bank digital currencies. Significance Central banks are investigating potential applications of central bank digital currencies (CBDCs) and this month the Financial Stability Board released its consultative paper on regulating and supervising stablecoins, which are pegged to a traditional asset. Issuance of CBDCs is growing closer. In emerging markets (EMs), they could provide governments with a tool to improve their monetary systems. Impacts Digital currencies can give central banks ‘precision monetary policy’ by bypassing intermediaries and targeting sectors or groups. The COVID-19 pandemic highlights the health advantage that digital money has over 'dirty' banknotes. Digital currencies will lower the cost of remittances to emerging nations but over years rather than months as barriers need to be overcome.

scholarly journals Framework for Preserving Financial Stability in Montenegro

2014 ◽  
Vol 3 (1) ◽  
pp. 27-41 ◽  
Author(s):  
Radoje Žugić ◽  
Nikola Fabris
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Primary Objective ◽  
Policy Framework ◽  
Policy Objective ◽  
The Global Financial Crisis

Abstract The global financial crisis has challenged the traditional monetary policy framework of one instrument (short-term interest rates) - one objective (price stability). More and more central banks nowadays consider financial stability as a monetary policy objective, whereas the Central Bank of Montenegro is the only one that has identified financial stability as its primary objective. As this is a relatively new objective, all central banks endeavouring to attain this objective have been facing numerous difficulties. Therefore, the article analyzes some of these difficulties such as defining financial (in)stability, the selection of indicators, macroeconomic environment for preserving financial stability, and the like. The main objective of the paper is to analyse the framework for preserving financial stability in Montenegro and the challenges that the Central Bank of Montenegro has been facing in accomplishing this objective

Central Bank Independence

2021 ◽  
pp. 39-67
Author(s):  
Patrick Njoroge ◽  
Désiré Kanga ◽  
Victor Murinde
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Financial Regulation ◽  
Central Banks ◽  
Central Banking ◽  
Central Bank Independence ◽  
First Century ◽  
Fiscal Discipline ◽  
Key Issues ◽  
Personal Accountability

The chapter covers central bank independence broadly and makes use of rich literature to bring out key issues on central bank independence from the inception of central banking in 1668 to the twenty-first century. The chapter identifies four measures of central bank independence mainly focusing on legal characteristics. The findings of the study point to benefits associated with independence of central banks, including management of inflation. Also, it is found that delegating monetary policy to an independent central bank increases debt sustainability and fosters fiscal discipline. It is noted that central bank independence needs to be reconciled with the requirements of institutional and personal accountability of the governors. Further, the financial regulation role should be strengthened in the mandates of central banks as the objective of price stability does not necessarily foster financial stability.

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