Modern Monetary Policy and Central Bank Governance: A Story of Two Tales

S.C.W. Eijffinger, D. Masciandaro

Research output: Working paperOther research output

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Abstract

The objective of this note is to present the evolution of both the economics and the political economy of monetary policy in the last three decades – first the Great Moderation and then the Financial Crisis – as a story of two intertwined tales: on the one side the tale of how to govern money and interest rates in the short run; on the other side the tale of how to design in a longer horizon the monetary architectures. In the tradition the two tales are told separately, where the academic scholars preferred to focus essentially on the first perspective while only the central bankers and partially the policymakers were also sensible to the engineering of the monetary settings. The big innovation in the modern monetary policy was the progressive merger of the analysis of the macroeconomic effects of the public choices in the monetary games played day by day (monetary policy) with the study of the structural features that characterized both the monetary players – governments and central bankers – as well as the rules and institutions of the monetary games that shape goals and incentives of the players (central bankers and other economic agents).
Original languageEnglish
Place of PublicationMilan
PublisherBAFFI Center on International Markets, Money and Regulation
Number of pages10
Volume2014-157
Publication statusPublished - Aug 2014

Publication series

NameBAFFI Center Research Paper
Volume2014-157

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Governance
Central bank
Monetary policy
Bankers
Economics
Great moderation
Politicians
Financial crisis
Public choice
Interest rates
Incentives
Macroeconomic impacts
Innovation
Government
Short-run
Mergers
Political economy

Cite this

Eijffinger, S. C. W., & Masciandaro, D. (2014). Modern Monetary Policy and Central Bank Governance: A Story of Two Tales. (BAFFI Center Research Paper; Vol. 2014-157). Milan: BAFFI Center on International Markets, Money and Regulation.
Eijffinger, S.C.W. ; Masciandaro, D. / Modern Monetary Policy and Central Bank Governance : A Story of Two Tales. Milan : BAFFI Center on International Markets, Money and Regulation, 2014. (BAFFI Center Research Paper).
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Eijffinger, SCW & Masciandaro, D 2014 'Modern Monetary Policy and Central Bank Governance: A Story of Two Tales' BAFFI Center Research Paper, vol. 2014-157, BAFFI Center on International Markets, Money and Regulation, Milan.

Modern Monetary Policy and Central Bank Governance : A Story of Two Tales. / Eijffinger, S.C.W.; Masciandaro, D.

Milan : BAFFI Center on International Markets, Money and Regulation, 2014. (BAFFI Center Research Paper; Vol. 2014-157).

Research output: Working paperOther research output

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AB - The objective of this note is to present the evolution of both the economics and the political economy of monetary policy in the last three decades – first the Great Moderation and then the Financial Crisis – as a story of two intertwined tales: on the one side the tale of how to govern money and interest rates in the short run; on the other side the tale of how to design in a longer horizon the monetary architectures. In the tradition the two tales are told separately, where the academic scholars preferred to focus essentially on the first perspective while only the central bankers and partially the policymakers were also sensible to the engineering of the monetary settings. The big innovation in the modern monetary policy was the progressive merger of the analysis of the macroeconomic effects of the public choices in the monetary games played day by day (monetary policy) with the study of the structural features that characterized both the monetary players – governments and central bankers – as well as the rules and institutions of the monetary games that shape goals and incentives of the players (central bankers and other economic agents).

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Eijffinger SCW, Masciandaro D. Modern Monetary Policy and Central Bank Governance: A Story of Two Tales. Milan: BAFFI Center on International Markets, Money and Regulation. 2014 Aug. (BAFFI Center Research Paper).