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Half a century has passed since Robert Lucas got his paper on expectations and the neutrality of money published in the Journal of Economic Theory. That article is widely considered as pathbreaking, starting a movement that changed the professional standards of doing macroeconomics. It arguably also affected the perception, if not the conduct of monetary policy and other stabilisation policies. This roundtable discussion collects comments from a panel of experts in a combination of prominent macroeconomists who have gathered ample experience of work in central banks and other authorities, and historians of economic thought. [ABSTRACT FROM AUTHOR]

The Continental Congress foray into printed money during the American Revolution was so disastrous that the United States printed no more money for nearly a century, the one exception being a brief period during the War of 1812. After that Congress chartered and unchartered its national bank twice. The American economy henceforth (1816–1836) was often structurally short of coins, and without any national coinage Americans had to find substitute forms of currency to finance the burgeoning economy. The Supreme Court ruled that sovereign States and individuals could authorize both State and private banks to issue their own notes. In consequence, nearly all paper money in circulation was either State or private banknotes based on a limited reserve of gold. This generally proved insufficient to adequately fund major infrastructure projects. The federal government also had no institution for raising or transferring large amounts of money to fund these national improvements. Nonetheless, Hamilton's U.S. Bank, without the help of a national currency, was an institutional precursor for what would not take final form until 1913. There would be no Federal Reserve today without the Whig-Republican agenda institutionally incarnated in the First and Second U.S. Bank. [ABSTRACT FROM AUTHOR]

Central bank communication plays a crucial role in the conduct of monetary policy, yet the research on central bank communication, while growing, is still scarce. In this paper, we analyze the communication reaction function of the European Central Bank (ECB) through topic-based indices derived from the bank's speeches. These indices are used as dependent variables in policy and communication reaction function models, as suggested by recent literature. The topics are extracted using Latent Dirichlet Allocation (LDA), a popular text mining algorithm for topic extraction. The ECB has recently reviewed its monetary policy strategy, which led to an increase in studies incorporating the new methods offered by text mining for analyzing the policy reaction function of the bank. We show how indices built through topic modelling can be used to study the communication reaction function of a central bank, and we examine which variables are significant for every topic communicated by the ECB. [ABSTRACT FROM AUTHOR]

The literatures on Macroeconomics and Human development and capabilities have been described as constituting "two different worlds" that never intersect despite the importance of macroeconomics for human development (Nayyar [2012]. "Macroeconomics and Human Development." Journal of Human Development and Capabilities 13 (1): 7–30.). This paper explores the barriers that keep the two worlds apart in policy making. It considers the case of national strategies for one is implementing UN Agenda 2030 (better known as the SDGs) with a commitment to equity and inclusion; the majority of which rely on social protection and neglect macroeconomic policies. This paper proposes four systemic barriers in the policy making processes: institutional silos and gaps, informational deficits, ideology, and interests. We highlight how these barriers play out in mutually reinforcing ways to construct resilient barriers: narrowly defined mandates of central banks and other economic agencies are reinforced by ideological commitments and the influence of vested interests to neglect inclusion, equity and sustainable development as policy objectives, and in policy research agendas. This in turn creates a vicious circle of information deficits with respect to policy alternatives. The paper discusses how these barriers play out differently in different policy making contexts for different stakeholders. [ABSTRACT FROM AUTHOR]

More than a decade of multi-actor conflict in Syria has resulted in a complex patchwork of legal identity documentation issued by state and non-state actors. This paper considers the legal identity practices pursued by the Kurdish-led Self Administration governing large swathes of territory in the north of the country. Specifically, the paper studies the forms of identity documentation the Self Administration does and does not provide to people present under its control. Beyond this, the paper focuses on how this system coexists with that of the central state, reflective of the Self Administration's broader approach of compromise combined with competition, to operate as a de facto authority respecting the overall sovereignty, yet challenging specific policies, of the central state. Against the backdrop of somewhat contradictory accusations of collaborating with the Syrian government and simultaneously seeking independence from it, the Self Administration has refrained from mimicking the state while expanding its own de facto 'jurisdictional subjecthood'. Practices of legal identity consequently help to elucidate necessary nuance in understanding the relations between the Self Administration and the government in Damascus. [ABSTRACT FROM AUTHOR]

In recent decades, and in particular since the shift towards independent central banks, there has been no explicit coordination of fiscal and monetary policy. In the Eurozone, this lack of coordination represents an important flaw, especially since the Eurozone is not an optimal currency area. Complementing monetary union with a transfer union represents one possible solution. This paper argues that the negative impact of post-2008 and post-Covid-19 unconventional monetary policy on income inequalities provides a second reason to coordinate fiscal and monetary policy. Among various institutional arrangements to implement such coordination, the paper defends the idea that the European Central Bank should be sensitive to distributive considerations when formulating its monetary policy. Such an arrangement would help both to contain the distributive side-effects of monetary policy and to at least partially remedy the flaw at the heart of the Eurozone as long as an outright transfer union remains unfeasible. [ABSTRACT FROM AUTHOR]

The paper examined the interest rate operations and processes in Nigeria and examined the role of financial development in incentivizing central bank monetary policies from the monetary policy rate to the money market rates, lending rates, and deposit rates. The analysis covered the period from 1981 to 2021 with sub-samples for 1981 to 2011 and 1991 to 2021 to test the consistency of the findings. The findings confirmed that interest rate pass-through is incomplete for Nigeria, albeit to a lower degree in the short run compared to the long run. The reasons for this may be due to interest rate stickiness, problems of asymmetric information, and bank switching costs. Also, the findings confirmed that financial development weakens the impact of monetary policy on the interest rate pass-through process, while the analysis of the asymmetric mean adjustment lags confirmed that changes in the policy rate are transmitted to the deposit and lending rates within the year it was announced. The analysis confirmed that the results across each sub-sample and the robustness tests are consistent with the main analysis. Therefore, it is imperative that policymakers should account for financial development when designing monetary policy effectiveness since it can hinder or strengthen the interest rate monetary policy channel. [ABSTRACT FROM AUTHOR]

Inflation expectations of firms affect their micro-decision-making behaviors and therefore impact the macro-economy. Thus, a deep understanding of how firms form inflation expectations benefits the achievement of central bank's policy objectives on macro-economic sustainability and development. In this paper, we focus on the inflation expectations of firms from surveys. Specifically, the Naïve Expectation, Adaptive Expectation, Rational Expectation, VAR, and Heterogeneous Static Expectation formation models are adopted to test the models being used by firms to form inflation expectations. Empirically, this paper reveals the heterogeneity between the formation mechanisms of households and firms. Then, empirical results reject the rational expectation hypothesis of firms' inflation expectations, which means that they are not perfectly rational. Finally, we find that the inflation perception is a non-negligible factor in forming firms' inflation expectations. Therefore, central banks' monetary policies that aiming to formulate firms' inflation perceptions can be a useful tool in regulating their inflation expectations, which are expected to benefit the stability of the macro-economy. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses papers published within the issue, including the value of the history of economic thought with the increase in degree of specialization of economic science, the expansion in the range and number of economic publications in the 18th century, and the role of central banks and its two conceptions, namely activism and minimalism.

After the great financial crisis of 2007–2009, central banks were handed a macroprudential mandate to contain systemic risks, a mandate seen as endangering their independence due to expected distributional conflicts. At the same time, depoliticization through scientific expertise was largely foreclosed, as systemic risk was a largely undefined concept. This paper focuses on how central banks dealt with this conundrum. It examines the scientific debate on systemic risk and macroprudential regulation post-crisis, focusing on the debate's impact on final regulation. Employing author-topic-modeling on a unique dataset of 2397 published economic papers on the relevant topics, we detect the formation of a new alliance between central bankers and academic economists working jointly on developing systemic risk measures. Centered around a hinge of systemic risk contribution by individual banks, this new alliance expresses itself by incorporating the macroprudential concerns of practitioners into abstract market-based systemic risk measures. These measures develop incrementally, using and repurposing techniques from financial economics pre-crisis to legitimize and justify macroprudential interventions post-crisis. This alliance allows us to account for the incremental change witnessed post-crisis and point to its potential for long-term fundamental change. [ABSTRACT FROM AUTHOR]

Presents abstracts of papers in the 1955 annual meeting of the Association of American Geographers. "Regional Geography in Central Banking," by Evan B. Alderfer; "A West Indian Anomaly, the British Virgin Islands," by John P. Augelli; "The Chemical Industry and the Midwestern Rivers and Intracoastal Canal," by J. Edwin Becht.

Focusing on Asian economies over the period 2006 to 2019, we find that while non-bank finance appears to complement rather than substitute credit provision by the traditional banking sector, weaker regulatory quality is an important driving factor. Moreover, while we find that central bank policy rates countercyclically affect credit provision by non-banks, impulse responses to monetary policy shocks with and without non-bank finance indicate that the effectiveness of monetary policy as a transmission channel to GDP growth, inflation, house prices, and traditional bank credit is weakened in the presence of non-bank finance. Our paper has implications for monetary policy implementation, potentially incorporating non-banks into central bank operations and liquidity provision, as well as for financial supervisors on mitigating regulatory arbitrage. [ABSTRACT FROM AUTHOR]

This paper traces R.G. Hawtrey's main contributions to the theory of the lender of last resort (LLR), both national and international (ILLR). This theory is a continuation of one of the traditions of the classical period, started by Henry Thornton, which differs in important points from that of Walter Bagehot. In their treatment of the classical concepts the authors partly depart from the interpretation of Thomas M. Humphrey, who considers that Thornton and Bagehot have basically the same approach about LLR. Hawtrey renewed Thonton's views and extended the concepts to new problems, including the ILLR. Hawtrey built a model of LLR in a dynamic macroeconomic model that includes the Cambridge market for cash balance and introduces the bases of a theory of ILLR, describing the sequence of twin crisis, exchange and banking crisis, thus explaining the difficulties for an ILLR to act on the currency market without taking the risks involved, in a situation completely different to the one faced on the money market by the national LLR. [ABSTRACT FROM AUTHOR]

This paper explores the distinct characteristics of China's digital economy during its rapid growth over the past decade and sheds light on the transformative impact that the digital economy has had on the Chinese society. The findings reveal that China's digital economy has experienced remarkable expansion in recent decades, driven by the convenience and efficiency it has brought about. Notable achievements include the development of robust digital infrastructure, the emergence of innovative digital finance, and the rapid growth of central bank digital currency. Throughout this digitalisation process, the government has played a pivotal role in driving and regulating the digital economy. Recognising the significance of digital transformation, the government has actively engaged in shaping policies and providing regulatory frameworks to foster a conducive environment for digital advancements and market regulation. [ABSTRACT FROM AUTHOR]

The 2008 financial crisis saw central banks introduce a variety of tools to shore up the financial system, including unconventional measures that made use of central bank balance sheets to directly shape markets. This paper argues that central banks increasingly rely on unconventional tools in noncrisis times to maintain confidence in an unstable financial system: in rich countries, outright asset purchase programs form the core of monetary policy, and in emerging capitalist economies, the sale and purchase of foreign exchange assets constitute the central mechanism of exchange rate policy. These interventions increasingly target 'market dysfunction,' as opposed to (a narrow interpretation of) monetary policy or the level of the exchange rate, suggesting a convergence in central bank operations around maintaining the plumbing of finance. Using two case studies – foreign exchange operations by the Reserve Bank of India and asset purchase programs by the U.S. Federal Reserve – the paper demonstrates a blurring of the boundaries between crisis and noncrisis interventions, and lends evidence to the concept of a de-risking state that guarantees liquidity. The paper concludes with a discussion of how a de-risking state exacerbates inequality, financial vulnerabilities and undermines meaningful action on pressing issues such as climate change. [ABSTRACT FROM AUTHOR]

This paper presents a simple model of the long-term interest rate. The model represents Keynes's conjecture that the central bank's actions influence the long-term interest rate primarily through the short-term interest rate, while allowing for other important factors. It relies on the geometric Brownian motion to formally model Keynes's conjecture. Geometric Brownian motion has been widely used in modeling interest rate dynamics in quantitative finance. However, it has not been used to represent Keynes's conjecture. Empirical studies in support of the Keynesian perspective and the stylized facts on the dynamics of the long-term interest rate on government bonds suggest that interest rate models based on Keynes's conjecture can be advantageous. [ABSTRACT FROM AUTHOR]

The aim of this paper is to assess to what extent the Taylor rule can be considered an appropriate representation of the tendency of central banks to react to inflation. After an overview of the origin and use of the Taylor rule, the paper stresses some difficulties in its implementation and the limits of its interpretation by the New Consensus models. Specifically, the inherent difficulties stemming from the notion and estimates of a benchmark interest rate determined by 'productivity and thrift' are pointed out. We then move on to advance an alternative interpretation of the Taylor rule along Classical-Keynesian lines. In this context, inflation is fuelled by conflicting claims on income distribution and the rule will be interpreted, as it is in actual fact, as a flexible and non-mechanical benchmark for monetary policies which will be seen to affect the division of product between wages and profits. [ABSTRACT FROM AUTHOR]

How do central bankers cope with the uncomfortable fact that there are significant limits to their expertise without losing authority? Drawing on Steve Rayner's concept of 'uncomfortable knowledge', this paper undertakes a historical examination of the early years of Paul Volcker's role at the head of the Federal Reserve, and then traces the ways in which the uncomfortable fact of ignorance has been dealt with in the years since then: from the reflexive and experimental approach of the 1980s, through the dismissal and displacement of the Great Moderation, to the exceptionalism and new experimentalism of the post-2008 era. In each of these eras, I argue that central banks face a visibility dilemma: their expertise must be visible enough to demonstrate their mastery but not so conspicuous that the often ad hoc and uncertain nature of their craft generates political push-back about their role and authority. [ABSTRACT FROM AUTHOR]

This special issue argues that to make sense of the increased prominence of central banks after the 2008 financial crisis and COVID-19 pandemic requires interrogating the sources of and limits to their governmental power. In a time in which the 'big state' has returned alongside new forms of financial speculation, the theoretical claim advanced by this introductory paper is that the state 'effect' is in crucial respects conditioned by the economic governance arrangements set in place by central banks. We show that at the same time as promoting entanglements between states and markets, central banks attempt to draw new boundaries between state and economy, lending an unstable and sometimes contradictory character to their interventions. Providing the outlines of a new historical sociology of central banking which introduces the papers in the special issue, we explore the double movement that has underpinned the evolution of central banking since early modernity and holds clues for unravelling the paradoxes of the present. [ABSTRACT FROM AUTHOR]

While a rich literature has examined how central banks mobilize narratives to enrol publics in monetary policymaking, the effects of the narratives deployed in banking supervision remain neglected. Drawing on 21 expert interviews, this paper fills that lacuna through a study of stress testing, a technique that became a fixture of international banking supervision after the 2008 crisis and which the Bank of England is using to align the risk management of the United Kingdom's banks with its sense-making about emerging financial stability risks. I theorize the entanglements of the Bank's financial stability narratives with binding supervisory requirements as giving rise to a new form of 'infrastructural power'. This perspective explains why some financial sector actors see their decision-making autonomy being sapped away by the Bank's stress tests even though they work through banks' own risk sensitive calculative infrastructures. The paper's findings also point to how the infrastructural affordances of central banks' forward-looking narratives are pushing the temporal frontier of the state-economy boundary further into the future than has traditionally been considered an appropriate operational domain. [ABSTRACT FROM AUTHOR]

This paper analyzes the US Federal Reserve (Fed)'s landmark 2012 decision to adopt an explicit inflation target for the first time in its history. The paper focuses on explaining the dynamics of this policy shift. The relevant literatures authoritatively establish types of incremental change and the transformative nature of this kind of change. Using the case of the Fed's policy shift, this paper advances a framework for explaining when the likelihood of such change increases, and how 'policy entrepreneurs" strategies can affect this likelihood. Its theoretical discussions are broadly applicable to other techno-political institutions. The paper's evidence comes from previously non-public internal Fed transcripts, and its discussions draw from diverse literatures – on the Fed and central banks, on multilateral economic institutions with similarly techno-political characteristics, historical institutionalism, as well as Macroeconomics. [ABSTRACT FROM AUTHOR]

There is little systematic work on how much the core of mainstream macroeconomics has changed since the crisis of 2008 and even less on what explains patterns of stability and change. This paper addresses this gap by first, mapping out debates over the core assumption of rational expectations in high-prestige academic publications and the research of central banks of systemic importance and second, deploying a sociological perspective to assess the various forms of capital deployed by orthodox defenders, radical challengers and constructive critics of this assumption. The paper finds that although the core of modern macro has seen a more robust radical challenge than one might have expect, the defense of rational expectations remained quantitatively dominant and substantively elastic. While radical challengers had access to significant material resources and symbolic capital, orthodox players control the institutions of the economics profession via editorial boards and refereeing for the top journals. As such, the orthodox exercise a strong gatekeeping function that allows some pluralism yet also goes some way toward explaining their continued intellectual dominance. [ABSTRACT FROM AUTHOR]

The private finance-led development model, promoted by international financial institutions, has faced a number of challenges. A major criticism is that the model promotes shadow banking, a system vulnerable to cyclical changes in liquidity. I argue that these criticisms do not go far enough because they fail to challenge the dominant understanding of shadow banking as a system of credit intermediation. In this paper, I propose an alternative analytical framework of shadow banking as a system that facilitates high risk-adjusted returns for institutional investors. This framework better clarifies the accommodations emerging markets make to sustain financial flows of which I outline two: (1) the provision of high-yielding financial assets, primarily through the issue of local-currency denominated sovereign bonds; and (2) the liquidity and insurance central banks provide, by drawing on expensive foreign exchange reserves, that enable investors to reap high risk-adjusted returns. The paper argues that rather than facilitating finance (or patient capital) to meet development objectives, a private finance-led model, by promoting the integration of emerging markets into the global shadow banking system, facilitates financial accumulation for global investors. [ABSTRACT FROM AUTHOR]

The relationship between the environment and climate change on one hand and the financial system, financial regulation and monetary policy on the other is growing in importance. This paper examines the possible impact of the European Central Bank's monetary policy of quantitative easing on the environmental policy of the European Union. Using data from Climate Bonds Initiative, the paper analyses the variation in the amount of "green labelled bonds" issued in the individual member countries of the Eurozone areas, as a function of liquidity inducing monetary policy variables. The paper finds a positive and significant relationship between the two measures. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between bank funding costs and solvency for a large sample of euro area banks using two proprietary ECB datasets for both wholesale funding costs and deposit rates. In particular, the paper studies the relationship between bank solvency, on the one hand, and senior bond yields, term deposit rates and overnight deposit rates, on the other. The analysis finds a significant negative relationship between bank solvency and the different types of funding costs. It also shows that this relationship is non-linear, namely convex, for senior bond yields and term deposit rates. It also identifies a positive realistic solvency threshold beyond which the effect of an increase in solvency on senior bond yields becomes positive. The paper also finds that senior bond yields are more sensitive to a change in solvency than deposit rates. Among the deposit rates, the interest rates of the overnight deposits are the least sensitive. Banks' asset quality, profitability and liquidity seem to play only a minor role in driving funding costs while the ECB monetary policy stance, sovereign risk and financial markets uncertainty appear to be material drivers. [ABSTRACT FROM AUTHOR]

Facing with the enormous economic loss resulting from the unexpected outburst of the COVID-19 pandemic, central banks around the world began to show a great activeness and implement numerous monetary policies to help mitigate the negative shocks and recover the economy. This paper aims at investigating the impact of the COVID-19 pandemic on the macroeconomy and whether central bank activeness have helped mitigate the negative shock of the COVID-19. Using the panel fixed effects model and monthly data of 38 countries from January 2020 to June 2021, this paper finds that the COVID-19 pandemic has increased inflation and unemployment apparently. More importantly, central bank activeness has a positive effect on reducing the growing pressure from the COVID-19 on inflation, while it cannot mitigate the shock of the COVID-19 on unemployment rate. Specially, government others measure, including containment and health, and stringency policies, have little effect in mitigating the negative impact of the pandemic on inflation and unemployment. Our findings suggest that the central bank activeness have heterogeneous effects on different macroeconomic indicators, and cannot mitigate the hurts of the COVID-19 pandemic for all macro indicators during the pandemic. [ABSTRACT FROM AUTHOR]

This paper presents multifactor Keynesian models of the long-term interest rate. In recent years, there have been a proliferation of empirical studies based on the Keynesian approach to interest rate modelling. These studies evince the connection between the long-term interest rate and the short-term interest rate. However, standard multifactor models of the long-term interest rate in quantitative finance have not been yet incorporated Keynes's insights about interest rate dynamics. Keynes's insights are introduced in two different multifactor models of the long-term interest rate to illustrate how the long-term interest rate relates to the short-term interest rate, after controlling for the central bank's policy rate, expected inflation, the central bank's inflation target, volatility in financial markets, and Wiener processes. [ABSTRACT FROM AUTHOR]

The paper examines the institutional architecture for financial supervision of a small jurisdiction and proposes reforms with a view of achieving more efficient and cost-effective financial supervision. The central argument of the paper is that there are complementarities and information synergies between prudential financial supervision, which aims at safeguarding the integrity and stability of the financial system, and the core central banking function of monetary policy. The point is made that that monetary policy and prudential supervision for financial stability should therefore be put under one roof, particularly in small jurisdictions, where duplication of research and information on the financial system leads to the wasteful use of limited human, technical (which includes technology) and financial resources. [ABSTRACT FROM AUTHOR]

This paper studies the economic functions of blockchain. First, by explaining blockchain technologies from an economic perspective, it introduces the Token Paradigm to summarize mainstream blockchain systems, discusses the true meanings of consensus and trustlessness in the blockchain field, and analyzes the functions of smart contracts. Next, it categorizes major blockchain applications according to how they use tokens and discusses relevant economic problems such as tokens' monetary features, tokens' impacts on blockchain platforms, blockchain's governance functions, and the efficiency and security of blockchain systems. Finally, it discusses the concept of Blockchain as a Financial Infrastructure (BaaFI), which is represented by central bank digital currencies (CBDC) and global stable coins. [ABSTRACT FROM AUTHOR]

This paper applies Latent Dirichlet Allocation (LDA), a machine learning algorithm, to analyse the transcripts of the U.S. Federal Open Market Committee (FOMC) covering the period 2003–2012, including 45,346 passages. The goal is to detect the evolution of the different topics discussed by the members of the FOMC. The results of this exercise show that discussions on economic modelling were dominant during the Global Financial Crisis (GFC), with an increase in discussion of the banking system in the years following the GFC. Discussions on communication gained relevance towards the end of the sample as the Federal Reserve adopted a more transparent approach. The paper suggests that LDA analysis could be further exploited by researchers at central banks and institutions to identify topic priorities in relevant documents such as FOMC transcripts. [ABSTRACT FROM AUTHOR]

Like most central banks, the European Central Bank makes and implements its monetary policy decisions by adjusting its targets for short-term interest rates in response to information gleaned from a wide range of macroeconomic indicators and projections. Unlike other central banks, however, the ECB also monitors money growth as a 'cross check' against the macroeconomic analysis that guides its policies of interest rate management. This paper argues that making further use of this 'second pillar' would help the ECB to better achieve its nominal objectives in the present environment of exceptionally low interest rates. By modifying the 'P-star' framework – a small-scale model with Quantity Theory foundations – the paper shows how the ECB could set a quantitative 'reference value' for Divisia money growth to stabilize nominal spending around a target path, even while its traditional interest rate policies are constrained by the zero lower bound. [ABSTRACT FROM AUTHOR]

Banking Union was a major policy response to the financial crisis that began in 2007 and the subsequent Eurozone crisis. Moral hazard has frequently been presented as a major cause of these crises. Therefore, Banking Union can be understood as a response to moral hazard in relation to banks and sovereigns. Yet, moral hazard was an acknowledged and supposedly managed problem prior to these events. Paradoxically, moral hazard has been used to justify contradictory policy options to safeguard European financial system stability, such as decentralized institutional arrangements for banking supervision but also a centralized system coordinated by the European Central Bank (ECB). To address this paradox, this paper investigates moral hazard as a political concept. Based on a comparison of how central bankers from the Bundesbank and the ECB understand and use the moral hazard concept, this paper argues that moral hazard is closer to the realm of politics than expertise. [ABSTRACT FROM AUTHOR]

This paper focuses on how gold as a physical object moves in financial markets, in what is known by many market participants as 'the gold space'. Gold acts today in financial markets as an ambiguous moral and calculative actor, whose material properties signify both solidity and speculation. This paper examines gold as a 'speculative substance' in two arenas: (1) controversies surrounding what should be done with the gold that is held in central banks as part of the sovereign wealth of nation-states but no longer as reserve currency; and (2) A split between markets for 'physical gold' and other financial assets that are based on gold, such as gold exchange-traded funds. [ABSTRACT FROM AUTHOR]

The financial crisis was the second worst in U.S. history. There are a variety of explanations for what caused it, but no consensus. Moreover, there is little agreement about when or why it ended. This paper investigates when and why the financial crisis began and when and why it ended. The analysis shows that the financial crisis was caused by a large reduction in mortgage lending standards which was primarily due to Congresses' mandate to increase homeownership. The paper provides evidence that the financial crisis was abating by January 2009 and ended when the recession ended in June 2009. The paper argues that neither deliberate monetary nor fiscal policy actions ended it. Rather, it was brought to an end by the unprecedented increase in the monetary base caused by the Fed's lending to banks and other financial institutions immediately following Lehman Bros. bankruptcy announcement on 15 September 2008. The increase was not a deliberate policy action but an unintended consequence of the fact that the Fed was no longer able to sterilize its lending after Lehman's bankruptcy announcement. The financial crisis ended because the Fed inadvertently followed Walter Bagehot's recommendation that during a crisis the central bank should lend freely. The Fed followed Bagehot's advice in spite of Bernanke's effort to sterilize the Fed's lending. [ABSTRACT FROM AUTHOR]

Post-crisis, central banks were encouraged to intervene against the cyclical build up of systemic risks in the financial system, a mandate which contravened previous conceptions of the state-economy boundary. This paper traces how central bank economists forged an analytical apparatus that could guide and legitimize such central bank interventions, detailing how their work involved forging new connections between actors within the boundary zone between the academic and the bureaucratic fields. Acting as 'economists in the wild', I show how these actors were able to establish 'stylized facts' about the boom-and-bust cycles of financial markets. Holding a foot both within the academic and the bureaucratic fields, such boundary walkers skilfully leveraged central bank resources to enrol allies in the field of academic economics to decisively shift the discursive representation of finance as cyclical, in turn legitimating ambitious central bank interventions into the functioning of the economy. [ABSTRACT FROM AUTHOR]

Social scientists have recently shown how markets are discursively constructed and have documented the role of central banks in these constructions. Although framed as a critique of the neoclassical economic view, this approach still operates within a narrow vision of the world as divided into distinct political, social and economic spheres. Our goal in this paper is to replace this view with an exchange-based understanding of agency and relationality. The puzzle of our paper is one that has captivated academics and practitioners alike: Why did the market respond so powerfully to the Bank of Japan Governor Haruhiko Kuroda's quantitative easing in 2013? Our focus is on the proliferation within the market and wider society of 'expectations'. A multiplicity of expectations, of different orders, different kinds, different scales, and different targets folded together to generate the efficacy of this event in central bank politics. [ABSTRACT FROM AUTHOR]

The South African Reserve Bank (SARB) is one of only nine central banks around the world with private shareholders. This paper contributes to the understanding of this ownership arrangement by outlining the history and evolution of private shareholding in the SARB since its inception in 1921 to the present day. It considers the reasons for shares having been issued to establish the SARB, and changes in legislation which influenced the SARB's ownership structure and the roles and responsibilities of the Board of Directors, shareholders and shareholder-elected directors. It also considers some earlier calls for the SARB to be nationalized. The historical overview shows that executive power has always rested with government appointees, while the government has gradually gained more control – relative to private shareholders – over the Board. This paper also confirms that – with respect to monetary policy – ownership of the SARB is purely notional. The SARB's policy goals and executive powers are derived directly from the government and the Constitution, and neither the shareholders nor the directors appointed by shareholders have a say in the SARB's mandate, its policy goals, or the conduct of monetary policy. The role of shareholders is limited to matters of corporate governance only. [ABSTRACT FROM AUTHOR]

This paper investigates the effectiveness of monetary policy in Turkey, i.e. a developing country with high inflation, through its impact on the local currency denominated sovereign yield curve. Employing a two-factor, market-based methodology and introducing a new dataset, the study calculates the surprise factor for both actions (monetary policy surprise) and words (communication surprise). Checking their impacts separately, the study finds evidence that the communication provided by the Central Bank of Turkey through Monetary Policy Committee Statements help to extend the impact of the monetary policy to the long end of the yield curve, even during periods of high inflation. [ABSTRACT FROM AUTHOR]

For the first time in the history of central banks, the Federal Reserve has been pursuing monetary policies which allow shadow banks to access its reserves. The paper examines these policies in an analysis based on the concept of security structure. The aim is to facilitate a better understanding of complex institutional arrangements which convert credit claims into money or enable them to simulate the money-form. As the financial crisis reached its peak in September 2008, the Fed was not able to contain the impact precisely because the security structure existing between banks and the Fed did not extend to the shadow banking system, which had meanwhile become thebackbone of the global financial system. To address this situation, the Fed initiated new security structures that were designed to also give players in the shadow banking system access to liquidity and collateral. The concept 'security structure' serves as an analytical tool to explore dynamic forms of safety and liquidity generation and to distinguish between credit expansion and money creation. It also helps to differentiate between three qualitatively different stages of security: central bank money, quasi-money and shadow money. In this way, it foregrounds the politics of (shadow) money creation. [ABSTRACT FROM AUTHOR]

This paper examines the impact of national culture on the decision of countries to adopt a central bank digital currency (CBDC). Using Hofstede's cultural framework (i.e. Power Distance, Individualism, Masculinity, Uncertainty Avoidance and Long-term Orientation) to measure different cultural values, we find that countries with more power distance, masculinity and long-term orientation cultures are more eager to adopt a CBDC. By contrast, countries with a cultural value leaning towards uncertainty avoidance are less involved in the adoption of a CBDC. These results hold more for retail CBDC than for wholesale CBDC. [ABSTRACT FROM AUTHOR]

The objective of this paper is to consider the cooperative game between the central bank and the government in the case of a non-euro country in the European Union or another country in the world that conducts an independent monetary policy and where statutory deficit restrictions were imposed on its budget. The study takes into account two independent players – the government and the central bank – that make autonomous decisions and are responsible for fiscal and monetary policy, respectively. Our mathematical policy mix model is based on the assumption that there exists some level of coordination between these policies. The article aims to analyse how the level of cooperation influences the behaviour of decision-makers in a specific policy mix model. As a result, the government taking into account the central bank's goals has no impact on the equilibrium of the budget deficit and interest rates. The conclusion about the central bank's privileged position emerged as a mathematical consequence of the proposed model. This is confirmed by another case where the government does not consider the central bank's target in its decisions; then, it does not prevent the monetary authorities from influencing the Nash equilibrium level of either decision variable. [ABSTRACT FROM AUTHOR]

This paper lists fifteen key policy implications resulting from a decision to introduce retail and/or wholesale central bank digital currencies (CBDCs). It makes the distinction between 'medium of exchange' and the 'exchange mechanism'. The former is one of the functions of money. The latter is a function of the technological approach in establishing the unit of account, store of value, and the payment protocol. Payments, transfers and settlement, are explored in respect of (i) wholesale CBDCs, (ii) retail CBDCs, (iii) digital payment platforms and, (iv) stablecoins. Each require distinct policy frameworks, and scholarly opinion on these are very diverse. Most academics agree on the privacy concerns related to account based digital money. The main areas of disagreement, however, are over which institutions/entities should be allowed to issue digital money, how such issuance should be supervised, and how decentralised digital tokens should be addressed from a policy perspective. [ABSTRACT FROM AUTHOR]

This paper constructs a text-based indicator that reflects the sentiment of the Bank of Spain economic outlook reports. Our sentiment indicator mimics very closely the first release of the GDP growth rate, which is published after the publication of the reports, and the Bank of Spain's quarterly forecasts of the GDP growth rate. In addition, not only the narrative is consistent with the quantitative projections, but it also complements them by discussing information which is not directly reflected in the point forecasts, and may put on the table potential risks that will be included in the numerical projections of the next quarter. Thus, while the quantitative projections tend to underestimate the GDP growth rate especially during upturns, the narrative allows to outweigh this conservative bias. Overall, from a Central Bank's communication perspective, it is the combination of quantitative forecast and narrative that provides a more precise picture of expected economic activity. [ABSTRACT FROM AUTHOR]

Investigations into the process by which cross-border payments are completed within the international monetary system remain largely unresolved. By exploring how these payments are executed through a flow of funds representation as per Institutional Practice—the operations of both the Central Bank and commercial banks within the payment and settlement system—this paper will (1) demonstrate that domestic monetary policy implementation entails the Central Bank offsetting all autonomous reserve flows to maintain an overnight policy rate; (2) show why global imbalances occur and persist across the international monetary system; and (3) outline the impact of involuntary constraints on policymaking. [ABSTRACT FROM AUTHOR]

With the rise of the shadow banking system, a new form of state–market hybridity has emerged, challenging existing monetary approaches to financial stability. A stable financial system today has essentially come to depend on a stable shadow banking system. Central banks are in the process of adapting to this new development. To secure the logic of laissez-faire market liberalism, the sovereign must resort to unprecedented measures and radically intervene in the financial markets. This new form of state–market hybridity forces central banks to provide ample reserves, to act as a dealer of last resort, and to give shadow banking actors access to their balance sheets. Such policies, however, produce new contradictions and fragilities. Based on Foucault's concepts of sovereignty and security, this paper argues that in today's world, the rationality of the laissez-faire security dispositif has become flanked by the rationality of sovereignty to a much greater extent than previously. Without losing its dominant status, the security dispositif is currently adapting so as to operate in crisis mode based on a post-laissez-faire rationality. The repo crisis of 2019 has demonstrated that central banks are still in the process of searching for ways to handle this new constellation. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the authors discuss various reports within the issue on topics including the global financial circumstance, the development of global financial safety net (GFSN), and the central bank currency swaps.

IT progress and its application to the financial industry have inspired central banks and academics to reflect about the merits of central bank digital currencies (CBDC) accessible to the broad public. This paper first briefly recalls the advantages that have been associated with CBDC and reviews some relevant background from the history of the issuance of different forms of central bank money. It then discusses two key arguments against CBDC, namely (i) risk of structural disintermediation of banks and centralization of the credit allocation process within the central bank and (ii) risk of facilitation systemic runs on banks in crisis situations. The paper proposes as solution a two-tier remuneration of CBDC, as a tested and simple tool to control the quantity of CBDC both in normal and crisis times. It is, however, also acknowledged that controlling the quantity of CBDC is not necessarily sufficient to control its impact on the financial system. Finally, the paper compares the financial account implications of CBDC with the one of crypto assets, stable coins, and narrow bank digital money, noting the similarity and differences in terms of implications on the financial system. It is concluded that well-controlled CBDC seems feasible, without this implying that CBDC would not catalyze change in the financial system. [ABSTRACT FROM AUTHOR]

The importance of the central bank and the government conducting their policies has increased recently, with more attention being given to the effectiveness of policy mix. The non-cooperative models of the monetary and fiscal game are frequently employed to study interactions between both authorities. The models assume that the authorities take into account each other's choices when making decisions. It is also important to remember when seeking equilibrium in the non-cooperative models that in the Nash Equilibrium (which is sought in this study) the parties try to come up with the best response to the opponent's decision. The aim of the paper is to present the Nash Equilibrium in a non-cooperative game between the government and the central bank using a non-cooperative model of a fiscal-monetary game (a policy-mix MODEL). This study demonstrates that in the Nash Equilibrium in the model, the budget deficit and interest rate of an EU member state depend on the exogenous data (external to the model), such as inflation target, base inflation and the Maastricht deficit limit. This study is enhanced by an analysis of the government and central bank's sensitivity to the deep parameters of economic variables. [ABSTRACT FROM AUTHOR]

This paper considers the extent to which the monetary policy operations of three major central banks can be regarded as an application of Proportional-Integral-Derivative (PID) control rules. The paper outlines the general PID framework and estimates a series of dynamic models to identify how interest rate policy adjustments are affected by the rate of inflation and the level of macroeconomic activity. The paper examines data for the UK, the USA and the Eurozone. The results suggest that the PID rules can provide a useful theoretical and empirical framework for estimating central bank responses to the inflation and macroeconomic activity variables by improving the explanatory power of the Taylor rule model and determining the effect of the parameters. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to highlight using international archives, the extent to which America's attempts to anchor its increasingly dominant global economic power and specifically the struggle between London and New York as the centre of global finance, impacted on the nature and character of the monetary policy advice given by these two international experts, as evident in their work on the Kemmerer-Vissering Commission. We show that Kemmerer, a representative of the rising new global economic powerhouse, the United States of America, and Vissering, a representative of a far less significant global player, the Netherlands, also with somewhat closer historical ties to Britain, were in fact instruments of these global dynamics, as they went about their work on the Commission. This global aspect of the narrative of the Kemmerer-Vissering report has not been highlighted by previous research. [ABSTRACT FROM PUBLISHER]