Central Banking Round-up

A couple of interesting papers on the evolution of central banking as well as a fun WSJ piece on how bombastic metaphors have taken over discussions of CB actions.

Calomiris, Charles ; Flandreau, Marc ; Laeven, Luc, “Political Foundations of the Lender of Last Resort: A Global Historical Narrative.” 

“This paper offers a historical perspective on the evolution of central banks as lenders of last resort (LOLR). LOLRs established prior to World War II, with few exceptions, followed policies that can be broadly characterized as implementing “Bagehot’s Principles” : seeking to preserve systemic financial stability rather than preventing the failure of particular banks, and limiting the amount of risk absorbed by the LOLR as much as possible when providing financial assistance. After World War II, and especially after the 1970s, generous deposit insurance and ad hoc bank bailouts became the norm. The focus of bank safety net policy changed from targeting systemic stability to preventing depositor loss and the failure of banks. Statutory powers of central banks do not change much over time, or correlate with country characteristics, instead reflecting idiosyncratic political histories.”

 

Anne Murphy, “The Bank of England and the genesis of modern management.”

“This paper focuses on the Bank as a site of precocious managerial development. It first establishes that the Bank, by the latter part of the eighteenth century, encompassed the complexities of a large-scale industrial enterprise. It employed a workforce of several hundred. Its workers operated in specialised and coordinated capacities. Its managerial hierarchy was diffuse and dependent on employed men, rather than the elected directorate.  It [the paper] will demonstrate that, although not always applied effectively, the Bank’s senior men did show managerial innovation and skill in training and organising the workforce and were able to make informed decisions which had the potential to improve some of the Bank’s processes.”

 

Jon Sindreu and Riva Gold, “Bazookas! Sinks! Aggressive Doves! Nobody Loves Silly Metaphors More Than Central Bankers,” WSJ, August 29, 2016.

“Since the crisis, an analysis of the Factiva media database shows, references in monetary-policy articles and blogs to artillery-related words—including bazookas, powder and firing blanks—rose to 7,300 in 2015 from 4,600 in 2010, although that’s down from more than 11,000 in 2011.” 

 

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