Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- Part II Financial Stability and Regulatory Policy
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- 19 Overburdened Central Banks
- 20 Central Banks, National Balance Sheets and Global Balance
- 21 Recognising the Economy as a Complex, Adaptive System
- 22 The Changing Fortunes of Central Banking
- Index
- References
21 - Recognising the Economy as a Complex, Adaptive System
Implications for Central Banks
from Part IV - The Millennium Challenges of Central Banks
Published online by Cambridge University Press: 29 March 2018
Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- Part II Financial Stability and Regulatory Policy
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- 19 Overburdened Central Banks
- 20 Central Banks, National Balance Sheets and Global Balance
- 21 Recognising the Economy as a Complex, Adaptive System
- 22 The Changing Fortunes of Central Banking
- Index
- References
Summary
Monetary policy has been conducted for decades on the basis of a false premise; namely that the economy is a relatively simple, understandable and stable machine under the competent control of its operator. Really bad things cannot happen. Analytical models based on that premise are highly misleading, indeed dangerous, and must be discarded. Really bad things do happen. Rather, the economy is a complex adaptive system like many others found in both nature and society. Other disciplines have studied the characteristics of such systems, and what they have found has clear lessons for the conduct of monetary policy. Not least, while taking steps to “lean against” rapid credit growth, which can lead to financial crises, steps must also be taken to deal with crises when they do occur. They are inevitable. Central banks should learn such policy lessons and also adapt to the associated need to cooperate more actively with other arms of government. There are limits to central bank “independence”.
- Type
- Chapter
- Information
- The Changing Fortunes of Central Banking , pp. 359 - 375Publisher: Cambridge University PressPrint publication year: 2018
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