Chapter

The Over-Burdened Central Bank and the Shift Away from Autonomy

Pierre L. Siklos

in Central Banks into the Breach

Published in print October 2017 | ISBN: 9780190228835
Published online August 2017 | e-ISBN: 9780190228866 | DOI: http://dx.doi.org/10.1093/oso/9780190228835.003.0005
The Over-Burdened Central Bank and the Shift Away from Autonomy

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Many central banks took on additional responsibilities. Inadequate self-assessments remain unfinished almost a decade after the crisis erupted. Government-central bank relationships need to be conditioned on whether times are normal versus crisis conditions. Transparency confronts ambiguity when central banks must communicate the outlook and the conditionality of their decisions. Forward guidance was taken too far and ended up being futile. Central bankers simply exhausted their ability to influence behavior through mere words or ambiguous statements. This is a self-inflicted wound for institutions that are seen as overburdened. These forces leave central banking more vulnerable than is commonly acknowledged. Squaring the conventional objectives of monetary policy with the unclear aims of financial stability is difficult. Adequate limitations on the authority of central banks have yet to be thoroughly debated. We are nowhere near resolving the inherent tensions between old and new sets of central bank objectives.

Keywords: central bank autonomy; transparency; accountability; zero lower bound; effective lower bound; Japanese monetary policy; inflation targeting

Chapter.  11878 words.  Illustrated.

Subjects: Public Economics

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