Challenges for Central Banking

It may be possible to claim that, generally speaking, central banks around the world have never before held such a central and well-respected position in their respective countries as they hold now. Their tasks seem to be reasona­ bly well defined and the mandate given to them to guarantee price stability has so far worked more successfully than was perhaps expected. Inflation is lower than it has been for a long time. One central bank after the other has been given a position independent of normal party political processes. Re­ search concerning monetary policy and other topics of relevance for central banking has made good progress during the past decade. Much of the mys­ tique that has typically surrounded the internal work and decision-making of central banks has gradually disappeared. Instead, openness and transparency have become the key words of the day. The communication channels of central banks; speeches, inflation reports, minutes of meetings, etc. receive considerable attention and often give rise to headlines in the media. The en­ vironment in which central banks work and act today has thus undergone changes that in my view are very positive. However, we should always be on our guard against complacency. It would be most dangerous for central bankers today to sit back and relax in the belief that all of the important problems have been resolved and need no further consideration. Unless central bankers remain constantly alert and vigilant, their policy-making can easily deteriorate. Front Matter....Pages i-ix Challenges for Central Banking: An Introduction....Pages 1-17 Financial Stability, Regulation, Supervision, and Modern Central Banking....Pages 19-37 Regulation and the Evolution of the Financial Services Industry....Pages 39-58 Regulatory Capital and the Supervision of Financial Institutions: Some Basic Distinctions and Policy Choices....Pages 59-79 Central Bank Supervision in the Digital Age....Pages 81-93 Central Banks and Supervision with an Application to the EMU....Pages 95-113 Clearing and Settling Financial Transactions, Circa 2000....Pages 115-137 Central Banks and the Payment System....Pages 139-153 Central Banking and the Economics of Information....Pages 155-171 Designing a Monetary Authority....Pages 173-185 Maintaining Low Inflation: Rationale and Reality....Pages 187-203 Monetary Transmission Lags and the Formulation of the Policy Decision on Interest Rates....Pages 205-228 Shrinking Money and the Effectiveness of Monetary Policy....Pages 229-245 Bank Credit Versus Nonbank Credit and the Supply of Liquidity by the Central Bank....Pages 247-270 Back Matter....Pages 271-274