Challenges for Central Banks: Wider Powers, Greater Restraints — The Financial Crisis and Its Aftermath

Philip Middleton () and David Marsh ()
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Philip Middleton: EY LLP, Postal: 1 More London Place, London SE1 2AF, United Kingdom, http://www.ey.com/
David Marsh: Official Monetary and Financial Institutions Forum (OMFIF), Postal: 1 Lyric Square, London W6 0NB, http://www.omfif.org/

Journal of Financial Perspectives, 2013, vol. 1, issue 2, 47-65

Abstract: This paper argues that whatever the macro- and micro-outcomes of the current economic, financial and regulatory crises, the roles of central banks worldwide are changing fundamentally. These changes will not be uniform, and different models of central banking, especially with regard to strategic remit and operational activities, will be seen in different jurisdictions. However, as a general rule, the role of the central bank will become bigger, riskier and more complex. In many instances, a re-evaluation of a central bank’s fundamental relationships, both formal and informal, will be required. These will include the institutional and governance relationships with both state governments and pan-national institutions, links with banks and financial firms over which the central bank may have monetary, fiscal and regulatory power, relationships with the media and communication with the electorate as a whole. Many central bankers will find this new transparency and accountability as irksome as it is novel, but attention will be required if the extended powers of the central bank are to be seen as legitimate. The paradox is that as central banks become inexorably more powerful and influential, the reins on their long-cherished independence will become tighter.

Keywords: Central Banking; Role of Central Banks (search for similar items in EconPapers)
JEL-codes: E58 G18 G21 G28 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofipe:0021

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