The central banking gospel was spread far and wide between 1900 and 1939. The Federal Reserve System, which came into operation in 1914, has pride of place in this chapter. However, in the 1920s and 1930s central banks were established in a range of countries in central and eastern Europe, the British empire, and Latin America. The motives of those who set them up were many and various, and indeed they often disagreed over the nature of the benefits that they would confer. Questions of institutional design, governance, and goals proved equally controversial.

After 1918, central banking proliferated in the context of global political and economic turmoil. Post-war instability and reconstruction lasted until the mid 1920s. Following a brief respite, the world economy plunged into depression in the early 1930s, and had barely recovered by the outbreak of the Second World War in 1939.