ABSTRACT
Monetary management as generally understood means the management of the money supply and monetary and credit-market conditions by the monetary authority (the central bank) in the pursuit of certain general social objectives. These objectives may either be assigned to the central bank by the national government or be left to the central bank to establish for itself, depending on whether the central bank is a subordinate instrumentality of national economic policy or is allowed a substantial measure of independence. In the past, economists specializing in the study of monetary management have been predominantly either institutionalists concerned with the detailed structure of the financial system and the precise institutional ways in which the central bank operates on that system in pursuit of its objectives, or economic historians concerned with the evolution of the financial organization of a particular country or countries, the theories of monetary management advocated by historically influential personages, and the influence of these theories on legislation affecting the structure of the financial system and the central bank’s concept of its role and functions. (There have, of course, always been non-specialist critics of financial organization and monetary management, some of whom have in due course achieved the status of historically influential personages.) With the professionalization of economics, the accompanying increase in confidence in the scientific approach to economic problems, and the resulting tendency to apply the scientific approach increasingly to problems of economic policy – problems in normative rather than positive economic science – that has occurred since the 1930s and especially since the Second World War, economists concerned with monetary management have become decreasingly concerned with institutional and historical questions per se and increasingly concerned with normative problems – i.e. with problems of efficiency in monetary management. This approach requires the application of economic theory – and in some cases of econometrics – more intensively to the processes and practices of monetary management than has generally been the case in the past.
