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Central Banks into the Breach: From Triumph to Crisis and the Road Ahead

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  • Siklos, Pierre L.

    (Viessmann European Research Centre, Wilfrid Laurier University, Ontario, Canada)

Abstract

Central banks play an important role in the course of national economies and the global economy. Their leaders are regularly feted or vilified, their policy pronouncements highly anticipated and routinely scrutinized. This is all the more so since the global financial crisis. The past fifteen years in monetary policy is essentially the story of two mistakes and one triumph, argues Pierre L. Siklos, a professor of economics at Wilfrid Laurier University. One mistake was that central bankers underestimated the connection between finance and the real economy. The other was a failure to realize how inter-connected the world's financial system had become. The triumph, in turn, was the recognition that price stability is a desirable objective. As a result of the financial crisis, central banks stepped into the breach to provide services other institutions were unwilling or unable to carry out. In doing so, the responsibilities for governing monetary policy and financial system stability became more elastic without due consideration for the appropriateness of the division of responsibilities. Central banks no longer influence just prices they also change financial system quantities. This leads to rising policy uncertainty. And low economic growth, an insufficiently unsubstantiated expansion of central bank responsibilities, and worries over future financial instability are sources of concern that contribute to a loss of confidence in the monetary authorities around the globe. Because no coherent new framework for central bank policy has since emerged, central banking is not broken, but it is in need of repair. Central Banks into the Breach provides an overarching analysis of the current and vulnerable state of central banks and offers potential solutions to stabilize the uncertain future of central banking.

Suggested Citation

  • Siklos, Pierre L., 2017. "Central Banks into the Breach: From Triumph to Crisis and the Road Ahead," OUP Catalogue, Oxford University Press, number 9780190228835.
  • Handle: RePEc:oxp:obooks:9780190228835
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    References listed on IDEAS

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    Cited by:

    1. Boulanouar, Zakaria & Alqahtani, Faisal & Hamdi, Besma, 2021. "Bank ownership, institutional quality and financial stability: evidence from the GCC region," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    2. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2017. "Asymmetric volatility connectedness on the forex market," Journal of International Money and Finance, Elsevier, vol. 77(C), pages 39-56.
    3. Kurov, Alexander & Stan, Raluca, 2018. "Monetary policy uncertainty and the market reaction to macroeconomic news," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 127-142.
    4. Pierre L. Siklos, 2018. "Has Monetary Policy Changed? How the Crisis Shifted the Ground Under Central Banks," Working Paper series 18-10, Rimini Centre for Economic Analysis.
    5. Michael D. Bordo & Pierre Siklos, 2017. "Central Banks: Evolution and Innovation in Historical Perspective," Economics Working Papers 17105, Hoover Institution, Stanford University.
    6. Forrest Capie, 2018. "The Bank of England Over 325 Years," Economic Affairs, Wiley Blackwell, vol. 38(3), pages 357-366, October.
    7. Monique Reid & Pierre Siklos, 2020. "Building Credibility and Influencing Expectations The Evolution of Central Bank Communication," Working Papers 10144, South African Reserve Bank.
    8. Michael D. Bordo & Pierre Siklos, 2019. "The Transformation and Performance of Emerging Market Economies Across the Great Divide of the Global Financial Crisis," NBER Working Papers 26342, National Bureau of Economic Research, Inc.

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