Introduction and Overview

Abstract

This volume tells the story of The Changing Fortunes of Central Banks from powerful, narrow-targeted, monetary institutions to expanded institutions with multiple tasks and uncertain outcomes. During this journey, the central banks gained hard-fought independence in the 1990s, which they are about to lose, at least partly, under a broader monetary and financial stability mandate. When governments must provide a fiscal backstop to the financial system, they also want to have a say. The chapter starts with twelve key contributions from the life of a central banker, Charles Goodhart. These contributions span monetary history and economics, financial stability and supervision, international central banking and foreign exchange. Next, this chapter introduces the volume Changing Fortunes of Central Banking and gives an integrated overview of the various chapters. The main conclusion is that a ‘full’ central bank is responsible for both monetary and financial stability, which are inextricably linked. On the monetary side, several authors argue for the return of money in our models. On the financial side, the design and use of macro-models should include financial frictions or financial intermediaries. Finally, financial stability models should go beyond exogenous shocks and allow for endogenous feedback loops.