International Aspects of Central Banking: Diplomacy and Coordination

Robert B. Kahn and Ellen Meade

No 2016-062, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In this paper, we discuss the evolution of central bank interactions since the early 1970s following the breakdown of the managed exchange-rate system that was negotiated at Bretton Woods. We review the most important forums or organizations through which central banks have engaged in diplomacy. We then discuss the mobilization of coordination through diplomacy using three examples over the past 30 years: the Plaza Accord in 1985 negotiated by the G-5; the response to the Asian financial crisis in 1997-98, led by the International Monetary Fund (IMF) with heavy participation from G-7 finance ministries and central banks; and the response to the global financial crisis that began in 2007. For each of these examples, we provide the economic circumstances at the time, discuss how the response was mobilized, and evaluate its success. Our main conclusion is that the relationship-building that is inherent in multilateral interaction has provided a springboard for coordination in times of stress or crisis. Moreover, crises matter in that they can be turning points in terms of the actions taken and the countries included in the dialogue; thus, the groupings themselves are to some extent endogenous to events. Finally, we use the lens of diplomacy and coordination to trace out the path for central bank diplomacy going forward.

Keywords: Central bank coordination; Global financial institutions; International monetary system (search for similar items in EconPapers)
JEL-codes: E58 F33 F55 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2016-07-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Chapter: International aspects of central banking: diplomacy and coordination (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-62

DOI: 10.17016/FEDS.2016.062

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