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During the Global Financial Crisis in 2008, our financial infrastructure failed. Governments bailed out the very institutions that let the economy down. This episode spurred a serious rethink of our financial system. Does it make any sense that it takes two days to settle a stock transaction? Why do retailers, operating on razor thin margins, have to pay 3% for every customer credit card swipe? Why does it take two days to transfer money from a bank account to a brokerage—or any other company? Why are savings rates miniscule or negative? Why is it so difficult for entrepreneurs to get financing at traditional banks? In DeFi and the Future of Finance, Campbell R. Harvey, Ashwin Ramachandran and Joey Santoro, introduce the new world of Decentralized Finance. The book argues that the current financial landscape is ripe for disruption and we are seeing, in real time, the reinvention of finance. The authors provide the reader with a clear assessment of the problems with the current financial system and how DeFi solves many of these problems. The essence of DeFi is that we interact with peers—there is no brick and mortar and all of the associated costs. Savings and lending are reinvented. Trading takes place with algorithms far removed from traditional brokerages. The book conducts a deep dive on some of the most innovative protocols such as Uniswap and Compound. Many of the companies featured in the book you might not have heard of—however, you will in the future. As with any new technology, there are a myriad of risks and the authors carefully catalogue these risks and assess which ones can be successfully mitigated. Ideally suited for people working in any part of the finance industry as well as financial policy makers, DeFi and the Future of Finance gives readers a vision of the future. The world of finance will fundamentally be changed over the coming decade. The book enables you to become part of the disruption – not the target of the disruption.

Central banks are major players in today's economic and financial policy-making. While respected for their technical acumen and their pivotal role in defusing the global financial crisis, they are at the same time mistrusted by others and considered to be too powerful. In order to contribute to a better understanding of the why, what and how of central banking, this book traces the progress of central banks from modest beginnings, including financing wars, to the powerful institutions they have become. It describes the evolution of the Bank of England to a fully-fledged central bank, the very different route taken by the Federal Reserve and, much later, by the European Central Bank. The gold standard, floating exchange rates, and the battle against inflation are covered in depth, alongside a review of modern monetary policy and central banks'role in maintaining financial stability. Throughout the book, the ups and downs of central banks'relationship vis-a-vis their governments are arecurring theme, even surmising that reigning in the independence of central banks risks inflicting serious damage to economic and financial stability. Uncovering the challenges that the money masters may face in an uncertain future, this book will be of interest to academics, researchers, and practitioners in central banking, finance, and economics at large.

The economic influence of central banks has received ever more attention given their centrality during the financial crises that led to the Great Recession, strains in the European Union, and the challenges to the Euro. The Oxford Handbook of the Economics of Central Banking reflects the state of the art in the theory and practice and covers a wide range of topics that will provide insight to students, scholars, and practitioners. As an up to date reference of the current and potential challenges faced by central banks in the conduct of monetary policy and in the search for the maintenance of financial system stability, this Oxford Handbook covers a wide range of essential issues. The first section provides insights into central bank governance, the differing degrees of central bank independence, and the internal dynamics of their decision making. The next section focuses on questions of whether central banks can ameliorate fiscal burdens, various strategies to affect monetary policy, and how the global financial crisis affected the relationship between the traditional focus on inflation targeting and unconventional policy instruments such as quantitative easing (QE), foreign exchange market interventions, negative interest rates, and forward guidance. The next two sections turn to central bank communications and management of expectations and then mechanisms of policy transmission. The fifth part explores the challenges of recent developments in the economy and debates about the roles central banks should play, focusing on micro- and macro-prudential arguments. The implications of recent developments for policy modeling are covered in the last section. The breadth and depth enhances understanding of the challenges and opportunities facing central banks.

In the last few decades, real GDP growth and investment in advanced countries have declined in tandem. This slowdown was not the result of weak demand (there has been no shift along the Okun curve), but of a decline in potential output growth (which has shifted the Okun curve to the left). We analyze what happens if central banks mistakenly diagnose the problem as insufficient demand, when it is actually a supply problem. We do this in a real model, in which inflation is not an issue. We show that aggressive central bank action may revive gross investment, but it will not revive net investment or growth. Moreover, low interest rates will lead to an increase in the capital output ratio, a low return on capital and high leverage. We show that these forecasts are in line with what has happened in major advanced countries.

Issues related to central banks feature regularly in economic news coverage, and in times of economic or financial crisis, especially when a commercial bank is bailed out, they become the focus of the policy debate. But what role do central banks play in a modern economy? How do central banks wield influence over the financial system and the broad economy? Through which channels does monetary policy impact macroeconomic fundamentals such as inflation or unemployment? For example, how does a central bank alter the money supply? What are the benefits of central bank independence, and what are the up- and downsides of having a common currency? This book provides easily accessible answers to these and other questions associated with central banking.

Central banks came out of the Great Recession with increased power and responsibilities. Indeed, central banks are often now seen as'the only game in town', and a place to put innumerable problems vastly exceeding their traditional remit. These new powers do not fit well, however, with the independence of central banks, remote from the democratic control of government. Central Banking in Turbulent Times examines fundamental questions about the central banking system, asking whether the model of an independent central bank devoted to price stability is the final resting point of a complex development that started centuries ago. It dissects the hypothesis that the Great Recession has prompted a reassessment of that model; a renewed emphasis on financial stability has emerged, possibly vying for first rank in the hierarchy of objectives of central banks. This raises the risk of dilemmas, since the Great Recession brought into question implicit assumptions that the pursuit of price stability would also lead to financial stability. In addition, the border between monetary and fiscal policy was blurred both in the US and in Europe. Central Banking in Turbulent Times asks whether the model prevailing before the Great Recession has been irrevocably altered. Are we entering, as Charles Goodhart has hypothesized, into the'fourth epoch'of central banking? Are changes to central banks part of a move away from the global liberal order that seemed to have prevailed at the turn of the century? Central Banking in Turbulent Times seeks to answer these questions as it examines how changes can allow for the maintenance of price stability, while adapting to the long-term consequences of the Great Recession.

Stanyo Dinov analyses and compares the three most advanced and most influential financial systems in the world, their structure, models of regulation and their actual financial legislation against the background of the global financial crisis in 2007. After a brief introduction, the first chapter is devoted to the function of the Central Banks and the two main divisions theories about the role of the CBs, namely their responsibility for monetary policy, or for monetary policy and banking supervision. The work also displays the four existing regulative approaches to financial supervision: the Institutional, the Functional, the Integrated and the Twin Peaks. The main part represents and compares the Central Banks and their regulatory structure, starting with the oldest one, the BoE. The benefits and the drawbacks of the one or the other system are outlined. In the conclusion, the most important results are presented and an ideal modal solution is suggested.

Macroprudential policy is perhaps the most important new development in central bank policymaking circles since the global financial crisis, and reliance on such policies has continued to spread. The crisis, which showed the limits of conventional monetary policy as a tool to deal with financial stability, forced a wide-ranging rethink of economic policies, their interactions and their repercussions. It has led to new forms of intervention, of regulation and of supervisory practice. Macroprudential regulation is now one of the most important topics in modern macroeconomics, because it concerns measures put in place to reduce the risks and costs of the instability caused by financial crises. Written by senior figures from the worlds of academia and banking, this volume combines theoretical approaches with hard evidence of the policy's achievements in many countries. It is the first in-depth analysis of macroprudential instruments for policymakers, banks and economists.

Drawing on the 2016 update of the IMF's Central Bank Legislation Database, this paper examines differences in central bank legal frameworks before and after the Global Financial Crisis. Examples from select countries show that many central bank laws have undergone changes in objectives, decision-making, accountability, and data collection. A wider cross-country survey illustrates the common occurrence of price stability in central bank objectives, and varying practices in defining financial stability, “independence” versus “autonomy,” and who within a central bank determines monetary policy. The highlighted facts illustrate the uses of the database and could be a starting point for further analyses.

'La vita dell'uomo è dominata dalla parola o dal denaro'. Se l'aforisma di Menandro ha resistito all'urto di più di venti secoli di storia e la commedia umana dell'oggi si specchia ancora in quella scheggia di pensiero, i banchieri centrali sono gli uomini e le donne più potenti del mondo. Con il celebre'whatever it takes'Mario Draghi entra nella storia e quella frase, emblematica del misterioso legame che esiste fra moneta, fiducia e parola, vale un'alea jacta est'. Dalle parole dei banchieri centrali derivano i comportamenti del mercato e molto di ciò che l'economia riverbera nella nostra vita di tutti i giorni. Se per anni hanno privilegiato una comunicazione oracolare, volutamente oscura e misticheggiante, oggi, al contrario, i governatori si confrontano con la nuova strategia della trasparenza e con le conferenze stampa. E le loro parole sono atti. Ma la lingua della sovranità monetaria si contamina con la lingua della sovranità politica e per i banchieri centrali si verifica il paradosso che, mentre sono creduti onnipotenti, diventano capro espiatorio se l'economia e le aspettative non vanno nella direzione del miglioramento, per cause, peraltro, non imputabili a ciò che compete loro.

The accepted narrative of the global financial crisis of 2007–09 is that the central banks saved us from an inferno caused by Wall Street greed. While there is no doubt they did save us, did the firefighters actually cause the fire as well? The Bank of England and US Federal Reserve have used the bait of low interest rates together with the bite of inflation in their quest for economic growth. Bluff reveals how these tactics have failed and instead left us with an unhealthy mix of debt, alternating booms in real estate and equity markets and laggard wages. In an incisive critique, Bluff makes the case for a much-needed public debate on the role of the all-powerful central banks; an acknowledgment of the damage caused by flawed policy decisions; and a vital reassessment of the social contract between the people and their central bank.

Surrounded by sluggish growth, high rates of unemployment, rising inequality, growing financial instability and increased social tensions, pessimism about our future abounds. Dr. Mohamed A. El-Erian, one of the world's most influential economic thinkers, explains lucidly the realities of the economic choices that we will soon face. The path that the global economy and markets are on is ending. But what comes thereafter is far from predestined. It critically depends on choices that we make as households and companies, and decisions that our political representatives take.  The Only Game in Town details how the world is increasingly being shaken, both from above and from below. It illuminates the growing internal contradictions, the constraints that are undermining growth and prosperity, and the radical overhaul in thinking that is required. In the aftermath of the financial crisis, central banks were handed responsibility for the fate of the global economy. Lifting the veil on the inner workings of these powerful and innovative institutions, El-Erian explains why they cannot save us this time around.  Laying out a road map for growth, The Only Game in Town shows how and why collaboration between central bankers, policymakers and business leaders is essential. Drawing on insights from behavioral science, economics and finance, this book provides the tools needed to understand the uncertainties that lie ahead and return us to a path of prosperity. Thought provoking and insightful, this book is required reading for investors, policymakers, and anyone interested in the future.

Global Imbalances, Financial Crises, and Central Bank Policies assesses the relationships between global imbalances, financial crises, and central bank policies, with a specific focus on their reserves. The book contains a strictly international perspective with an analysis based on empirical research that enables the reader to develop an analytical model that emphasizes interactions among individual central banks. With this innovative approach, the book develops a new method for defining an optimal demand for reserves. In addition, the book describes implications for financial reforms that might ultimately be more important than its empirical findings. - Presents a systematic account of the relationship between the build-up of reserves and central bank policies - Emphasizes a global view of currency reserves, which is usually ignored in analyses of their effect - Includes datasets as well as all illustrations and figures in online ancillary materials

Countries with evolving monetary regimes that decide to embark on “the Journey to inflation targeting” may not be able to adopt a full-fledged inflation targeting regime immediately. Those countries would be better off adopting transitional arrangements that take advantage of the informational content of monetary aggregates, developing an economic analysis capacity, and concentrating on monetay operations aimed at steering money market interest rates. This approach would allow the central bank to buy time for developing the building blocks for effective monetary policy, support transparent central bank communication, and limit the potential for undesirable outcomes along the road.

International Debt Statistics (IDS) 2014 is a continuation of the World Bank's publications Global Development Finance, Volume II (1997 through 2009) and the earlier World Debt Tables (1973 through 1996). IDS 2014 provides statistical tables showing the external debt of 128 developing countries that report public and publicly guaranteed external debt to the World Bank's Debtor Reporting System (DRS). It also includes tables of key debt ratios for individual reporting countries and the composition of external debt stocks and flows for individual reporting countries and regional and income groups along with some graphical presentations.IDS 2014 draws on a database maintained by the World Bank External Debt (WBXD) system. Longer time series and more detailed data are available from the World Bank open databases, which contain more than 200 time series indicators, covering the years 1970 to 2012 for most reporting countries, and pipeline data for scheduled debt service payments on existing commitments to 2019.International Debt Statistics 2014 is unique in its coverage of the important trends and issues fundamental to the financing of the developing world. This report is an indispensable resource for governments, economists, investors, financial consultants, academics, bankers, and the entire development community.In addition, International Debt Statistics will showcase the broader spectrum of debt data collected and compiled by the World Bank. These include the high frequency, quarterly external debt database (QEDS) and the quarterly public sector database (QPSD) developed in partnership with the International Monetary Fund and launched by the World Bank.

Understand the theories and interpret the actions of modern central banks Central Banking takes a comprehensive look at the topic of central banking, and provides readers with an understanding and insights into the roles and functions of modern central banks in advanced as well as emerging economies, theories behind their thinking, and actual operations practices. The book takes a systematic approach to the topic, while providing an accessible format and style that is appropriate for general audiences and students with only a minimal macroeconomic background. Theoretical reviews and examples of how the theories are applied in practice are presented in an easy-to-understand manner and serve as a guide for readers to further investigate specific ancillary central banking topics and as a means to make informed judgments about central bank actions. Important topics covered in the book include: Evolution of central banking functions and the international monetary system Theoretical backgrounds that are the foundation to the modern practice of monetary policy Monetary policy regimes, including exchange rate targeting, money supply growth targeting, the risk management approach, inflation targeting, and unconventional monetary policy. Actual practice in market operations and transmission mechanisms of monetary policy The exchange rate and central banking Theoretical backgrounds related to various dimensions of financial stability Current developments with regards to sustaining financial stability The future of central banking in the wake of the 2007-2010 global financial crisis Case studies on relevant practical issues and key concepts in central banking Designed as essential reading for students, market analysts, investors, and central banks'new recruits, Central Banking better positions readers to interpret the actions of central banks and to understand the complexities of their position in the global financial arena.

The Changing Role of Central Banks derives lessons from current economic and financial challenges as well as failures in confronting them. Through this approach, it brings under perspective political and social reactions to major economic problems of the last ten years, particularly those pertaining to money and initiatives taken by central banks.

This paper highlights the changing collateral landscape and how it may shape the global demand/supply for collateral. We first identify the key collateral pools (relative to the “old” collateral space) and associated collateral velocities. Post-Lehman and continuing into the European crisis, some aspects of unconventional monetary policies pursued by central banks are significantly altering the collateral space. Moreover, regulatory demands stemming from Basel III, Dodd Frank, EMIR etc., new net debt issuance, and collateral connectivity via custodians (e.g., Euroclear/ Clearstream/ BoNY etc) will affect collateral movements.

The Gold Cartel is an insightful and thought-provoking analysis of the world market for gold, how it works, and what influences gold price. But it also lends insight into something more disturbing – the organized intervention in the gold markets by Central Banks.

Enhancing the Capabilities of Central Finance Agencies: Synthesis Report presents the findings of a study of the functions performed by CFAs, defined as government organizations that carry out financial management functions for the whole of government. Using a political economy approach to the analysis of CFAs in ten case studies of low-income countries, the report identifies the principal constraints on the capability of CFAs as: interventions by the head of the state, sometimes outside the provisions of the constitution and budget law, in executive decisions on the institutional arrangements and fiscal policy; deficiencies in management, ranging from excessively centralized and hierarchical decision-making processes to poor staff management and record keeping; and inadequate coordination among donors—and between donors and their clients in finance and planning ministries—in designing and implementing strategies for reforming CFAs and PFM systems. Drawing on results of the cross-country survey of CFAs, the first of its kind, the report presents evidence and offers explanations for an “inverted U-curve” for the concentration of central finance functions across country income groups. In low-income countries, CFA functions are often poorly defined and may be performed by agencies other than the Finance Ministry, leading to fragmented and inconsistent policy implementation. Middle income countries tend to concentrate central finance functions in the Finance Ministry to strengthen their control. In high-income countries, Finance Ministries tend to retain control of policy but delegate operational functions to specialized agencies. The report will be of interest to country authorities seeking to improve coordination across central finance functions and other stakeholders in the reform process

Credit rating agencies face a difficult trade-off between delivering both accurate and stable ratings. In particular, its users have consistently expressed a preference for rating stability, driven by the transactions costs induced by trading when ratings change frequently. Rating agencies generally assign ratings on a through-the-cycle basis whereas banks'internal valuations are often based on a point-in-time performance, that is they are related to the current value of the rated entity's or instrument's underlying assets. This paper compares the two approaches and assesses their impact on rating stability and accuracy. We find that while through-the-cycle ratings are initially more stable, they are prone to rating cliff effects and also suffer from inferior performance in predicting future defaults. This is because they are typically smooth and delay rating changes. Using a through-the-crisis methodology that uses a more stringent stress test goes halfway toward mitigating cliff effects, but is still prone to discretionary rating change delays.

Keeping an economy growing over the long run at rates sufficient to provide full employment for labor and capital with low inflation or a stable price level has been an important goal for economic policy. Money and monetary policy have figured importantly in achieving this goal. Currently, it is argued, central bank independence is important to achieving this end. This book examines various indices of central bank independence to see how closely independence is related to such important performance characteristics of an economy as the rate of inflation, the growth of output, investment, and real interest rates.

The activities of central banks are relevant to everyone in society. This book starts by considering how and why in general central banks evolved and specifically the special aspects of the contribution of the Northern European Central Banking Tradition. With that foundation, the book will then turn to a series of contemporary themes. Firstly, this book looks at independence, how central banks can actually influence their respective economies, goals, responsibilities and governance.This collection of papers, formulated from the joint conference of the Bank of Finland and the Deutsche Bundesbank in November 2007, will help motivate continuing research into the institutional design of central banks and promote a better understanding of the many challenges central banks are facing today. This volume gives a detailed perspective on the benefits of price stability and central bank independence and, due to the advances in macroeconomic theory, has prompted a substantial rethink on central banks'institutional design. With contributions from such scholars as Anne Sibert and Forrest Capie and a foreword by Erkki Liikanen and Professor Axel A. Weber, this volume will be useful reading for monetary economists around the world as well as all those with an interest in central banks and banking more generally.

Changes in the field of central banking over the past two decades have been nothing short of dramatic. They include the importance of central bank autonomy, the desirability of low and stable inflation, and the vital role played by how central banks communicate their views and intentions to the markets and the public more generally. There remains considerable diversity nevertheless in the institutional framework affecting central banks, the manner in which the stance of monetary policy is determined and assessed, and the forces that dictate the conduct of monetary policy more generally. The global financial crisis, which began in the United States in 2007, only serves to highlight further the importance of central bank policies. The aim of this volume is to take stock of where we are in the realm of the practice of central banking and considers some of the implications arising from the ongoing crisis.

An inside look at the role and future of central banking in the global economyThe crash of 2008 revealed that the world's central banks had failed to offset the financial imbalances that led to the crisis, and lacked the tools to respond effectively. What lessons should central banks learn from the experience, and how, in a global financial system, should cooperation between them be enhanced? Banking on the Future provides a fascinating insider's look into how central banks have evolved and why they are critical to the functioning of market economies. The book asks whether, in light of the recent economic fallout, the central banking model needs radical reform.Supported by interviews with leading central bankers from around the world, and informed by the latest academic research, Banking on the Future considers such current issues as the place of asset prices and credit growth in anti-inflation policy, the appropriate role for central banks in banking supervision, the ways in which central banks provide liquidity to markets, the efficiency and cost-effectiveness of central banks, the culture and individuals working in these institutions, as well as the particular issues facing emerging markets and Islamic finance. Howard Davies and David Green set out detailed policy recommendations, including a reformulation of monetary policy, better metrics for financial stability, closer links with regulators, and a stronger emphasis on international cooperation.Exploring a crucial sector of the global economic system, Banking on the Future offers new ideas for restoring financial strength to the foundations of central banking.

Domestic and foreign financial assets of all central banks and public wealth funds worldwide are estimated to have reached more than 12 trillion US dollars in 2007. How do these institutions manage such unprecedented growth in their financial assets and how have they responded to the'revolution'of risk management techniques during the last two decades? This book surveys the fundamental issues and techniques associated with risk management and shows how central banks and other public investors can create better risk management systems. Each chapter looks at a specific area of risk management, first presenting general problems and then showing how these materialize in the special case of public institutions. Written by a team of risk management experts from the European Central Bank, this much-needed survey is an ideal resource for those concerned with the increasingly important task of managing risk in central banks and other financial institutions.

This book explores three key areas of central banking and governance - autonomy, accountability and transparency. It looks at links between the areas, as well as assessing the impact of central bank autonomy on macroeconomic performance. The issues are approached from theoretical and empirical perspectives.

The number of central banks in the world is approaching 180, a tenfold increase since the beginning of the twentieth century. What lies behind the spread of this economic institution? What underlying process has brought central banks to hold such a key role in economic life today? This book examines from a transatlantic perspective how the central bank has become the bank of banks. Thirteen distinguished economists and central bankers have been brought together to evaluate how central banks work, arrive at their policies, choose their instruments and gauge their success in managing economies, both in times of crisis and periods of growth.Central banks have gained greater independence from government control over the last 20 years. This widespread trend throws up new questions regarding the foundations, prerogatives and future of this economic institution.This book provides a better understanding of the current financial crisis through the in-depth study of the central bank. Researchers in the fields of monetary theory, monetary policy and central banking will find this volume of great interest. It will also appeal to students of economics, political economy, banking and finance, as well as economists, academics, and public policy advisers and analysts.

Money is a social convention, but with what social consequences? In this innovative study, Rodney Bruce Hall argues that those who govern the parameters of money's creation, its destruction, and its valuation are responsible for the governance of international finance. The volume is an analysis of central banking as global governance, employing the institutional philosophy of John Searle as a theoretical basis for exploring the consequences of money as a social institution, and the social relations of credit and debt. While previous studies in this field have made forays into the political economy of monetary institutions, this book breaks new ground by offering a constructivist social analysis that identifies the mechanisms of governance as social rather than material processes. The volume will therefore be of great interest to a wide range of scholars and students, particularly those with an interest in international relations, international finance and international political economy.

In a series of disarmingly simple arguments financial market analyst George Cooper challenges the core principles of today's economic orthodoxy and explains how we have created an economy that is inherently unstable and crisis prone. With great skill, he examines the very foundations of today's economic philosophy and adds a compelling analysis of the forces behind economic crisis. His goal is nothing less than preventing the seemingly endless procession of damaging boom-bust cycles, unsustainable economic bubbles, crippling credit crunches, and debilitating inflation. His direct, conscientious, and honest approach will captivate any reader and is an invaluable aid in understanding today's economy.

Payment systems are changing profoundly through regulation, technology and competition from new entrants. This is a comprehensive introduction and reference on payment systems, covering their structure, international systems and settlements, and focusing on electronic transfers. Concludes with the future of the payments business.

Drawing on wide-ranging contributions from prominent international experts and discussing some of the most pressing issues facing policy makers and practitioners in the field of payment systems today, this volume provides cutting-edge perspectives on the current issues surrounding payment systems and their future.It covers a range of continually im

A mixture of academic and practitioner research, this is the most detailed book available that provides an account of open market operations. With broad international appeal it includes discussions of central bank operations in Europe, North America, Australia and Japan. Exploring the effectiveness of short-term interest rates and other modern cent

International in scope and written by a leading young Post-Keynesian economist, this book focuses on the working of money and payments in a multi-bank settlement system within which banks and non-bank financial institutions have been expanding their operations outside their countries of incorporation.Departing from conventionally held beliefs, Serg

'Central bankers worldwide welcome the recent increase of research on payment systems. This volume, providing an expert overview on this timely subject, should be required reading for us all'. - Erkki Liikanen, Governor of the Bank of Finland Monetary policy has been at the centre of economic research from the early stages of economic thought, but payment system research has attracted increased academic attention only in the past decade. This book's succeeds in merging these two so far largely separated fields. Innovative and groundbreaking, Schmitz and Woods initiate research on the interdependence of institutional change in the payments system and monetary policy, examining the different channels via which payment systems affect monetary policy. It explores important themes such as: conceptualization and methods of analysis of institutional change in the payments system determinants of institutional change in the payments system – political-economy versus technology empirics of institutional change in the retail and in the wholesale payments systems – policy initiatives and new technologies in the payments system implications of institutional change in the payments system for monetary policy and the instruments available to central banks to cope with it. The result is an accessible overview of conceptual and methodological approaches to institutional change in payment systems, and a comprehensive and yet thorough assessment of its implications for monetary policy. The insights this timely book provides will be invaluable for researchers and practitioners in the field of monetary economics.

Although little noticed, the face of central banking has changed significantly over the past ten to fifteen years, says the author of this enlightening book. Alan S. Blinder, a former vice chairman of the Federal Reserve System and member of President Clinton's Council of Economic Advisers, shows that the changes, though quiet, have been sufficiently profound to constitute a revolution in central banking.Blinder considers three of the most significant aspects of the revolution. The first is the shift toward transparency: whereas central bankers once believed in secrecy and even mystery, greater openness is now considered a virtue. The second is the transition from monetary policy decisions made by single individuals to decisions made by committees. The third change is a profoundly different attitude toward the markets, from that of stern schoolmarm to one of listener. With keenness and balance, the author examines the origins of these changes and their pros and cons.

Grounding its analysis in the historical evolution of financial regulation, this book addresses a range of public policy issues that concern the design of financial regulation and its enforcement, and contributes several new ideas to the debate in this field. Financial systems have become more competitive across sectors of financial institutions and nations, and direct regulations have been removed in pursuit of efficiency. However, as the risk of institutional failures has increased, de-regulation has had to be followed by re-regulation. In which form should this happen? This book answers this question. First revisiting the issue of'why to regulate', Padoa-Schioppa argues that the need to continue to regulate banks in a special way follows from their key role as liquidity providers. At the same time, his argument recognizes the need for close interplay in the regulation of different financial sectors. The book goes on to discuss'how'regulation should be carried out in the modern environment. It should be market-friendly, but the balance between official intervention and market discipline is difficult to get right. Moreover, in an increasingly international context, financial regulation has to be evenly applied across countries to avoid regulatory arbitrage. The final part of the book turns to issues specifically connected with developments in the European Union. One major issue is the maintenance of financial stability in the Euro area where the financial system is becoming especially integrated. Another major issue is the appropriate role of central banks. As the literature and practice are still very much under development, Padoa-Schioppa analyses the general aspects of the financial stability function of central banks -- particularly in relation to the monetary policy and supervision functions -- as well as the tools available for the Eurosystem.

This volume offers a broad context for the question of why governments prefer to limit themselves to a specific inflation target. Academic specialists and senior officials of the European Central Bank, the OECK and national central banks look beyond inflation targeting as the goal of monetary policy. Nobel Laureate Robert Mundell, surveys the history and prospects of the sovereignty of the state over money, while Michael Bordo and Lars Jonung use data of 14 industrialized countries over the past century to show relationships between fiscal and monetary regimes.