ABSTRACT
Introduction Over the last 20 years a large number of new central banks have come into being in the former Soviet Union and in the former communist Central and East European countries. This has generated an upsurge of interest in how central banks should best be designed for the modern world. This has occurred at the same time that the European System of Central Banks and the European Central Bank have been designed and come into operation. A third force overlays this remarkable period of change. In tandem with the reorganisation of corporate governance and managerial focus of private-sector firms and public-sector organisations, central banks have also been transforming themselves into focused and efficient organisations that deliver the targets required of them in an open and verifiable manner. Gone are the days that central banks were a ‘gentleman’s club with an interest in finance’. Between them, these factors have led to a considerable consensus on the focus of central banks, how they should be structured and governed, and on how they should operate. Our task in this book is to explore how this apparent consensus has arisen, how it contrasts with the past, what it contains and how it may develop in the future. To do this we have organised contributions from well-known authorities in the field to put together the various facets of our task. The individual chapters reflect the personal views of the authors but we took the opportunity to bring all the contributors together in a conference held at the Bundesbank’s conference and training centre in Eltville to discuss these ideas. Hence the chapters are followed by a discussion, reflecting a wider range of views. This book is organised very much as the conference was. It starts with two chapters on the origins of central banking, looking both at the Anglo-Saxon model, and at the slightly different history in northern Europe. This prepares the way for chapters on what history reveals to be the two core – indeed, defining – functions of central banks. These are the preservation of monetary and of financial stability. These are considered in that order, the first section incorporating both a most imaginative discussion of the communications strategy of central banks and how that can be used to assist achievement of the price stability objective and an examination of how that objective can in practice be defined.
