The Mayekawa Lecture: Central Banks-Paradise Lost

The focus of the paper is to analyze how the concept behind central bank policy developed over time and how the recent financial crisis and its consequences will have an influence. While the principles of the institutional arrangement for central banks (independence, clear mandate, prohibition of monetary financing) are relevant as ever, pre- crisis consensus strategies of monetary policy have been revealed as flawed. The close monitoring of money and credit developments, a key lesson to be drawn from the crisis, however, does not imply the extension of the central bank fs mandate to financial stability. As much as central banks should demonstrate modesty in what they deliver, equally their reputation should not be challenged further by other tasks imposed upon them.