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The Quiet Revolution: Central Banking Goes Modern

Alan S. Blinder
Foreword by Robert J. Shiller
Copyright Date: 2004
Published by: Yale University Press
Pages: 144
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  • Book Info
    The Quiet Revolution
    Book Description:

    Although little noticed, the face of central banking has changed significantly over the past ten to fifteen years, says the author of this enlightening book. Alan S. Blinder, a former vice chairman of the Federal Reserve System and member of President Clinton's Council of Economic Advisers, shows that the changes, though quiet, have been sufficiently profound to constitute a revolution in central banking.

    Blinder considers three of the most significant aspects of the revolution. The first is the shift toward transparency: whereas central bankers once believed in secrecy and even mystery, greater openness is now considered a virtue. The second is the transition from monetary policy decisions made by single individuals to decisions made by committees. The third change is a profoundly different attitude toward the markets, from that of stern schoolmarm to one of listener. With keenness and balance, the author examines the origins of these changes and their pros and cons.

    eISBN: 978-0-300-12750-8
    Subjects: Finance

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Illustrations
    (pp. ix-x)
  4. Foreword
    (pp. xi-xvi)
    Robert J. Shiller

    The “quiet revolution” that has taken place in central banking around the world in recent years represents changes in both procedure and substance. Alan Blinder describes changes in central bank procedures that underlie monetary policy: changes in public relations, in bureaucratic structure, and in the use of financial data. And yet, as he shows, the procedural changes are very much related to changes of substance, for the procedure influences the efficacy of monetary policy and answers some of the deepest concerns of central bankers.

    Progress in the formulation of monetary policy appears to involve changes in procedure rather than in...

  5. Acknowledgments
    (pp. xvii-xx)
  6. Introduction
    (pp. 1-4)

    Research on central banking is a growth industry. A computer search on the phrase “central banking,” conducted on EconLit, turned up 980 references in the 1970s, 1,929 in the 1980s, and a staggering 4,921 in the 1990s. Performance like that does not quite match the stock market, but it is close. I will leave it to Bob Shiller to decide whether this growth reflects solid fundamentals or a faddish irrational exuberance.¹ But I will wager that the academic literature on central banking will not fall into a slump comparable to that of the Nasdaq.

    In any case, all this quantitative...

  7. CHAPTER 1 Through the Looking Glass: Central Bank Transparency
    (pp. 5-33)

    If there has been any storming of the Bastille during the quiet revolution in central banking, it has been the assault—mounted by some academics and a few central bankers—on the age-old notion that a central bank ought to be secretive and opaque. What happened to produce the sharp attitudinal changes I mentioned in the introduction? What are the main arguments in favor of greater transparency? And how can we evaluate the changes that have already taken place—and those yet to come? These are some of the main questions for this chapter. But first we must define our...

  8. CHAPTER 2 Ex Uno Plures: Central Banking by Committee
    (pp. 34-64)

    Economics is the science ofindividualchoice. Ever since the days of Adam Smith, economists have glorified the ability of individuals to reach decisions that best serve their own interests. The stereotypical hero of economics is the lone-wolf entrepreneur who is guided, as if by an invisible hand you might say, to the right conclusions even though others may insist that he is wrong—just the sort of person Ayn Rand had in mind when she created Howard Roark. So it is hardly surprising that virtually all theories of central bank behavior model the central bank as a single optimizer...

  9. CHAPTER 3 Following the Leader: The Central Bank and the Markets
    (pp. 65-97)

    Over the past decade or so, central bank independence has been the subject of a vast outpouring of academic literature,¹ a great deal of real-world debate in political and public policy circles, and a substantial amount of legal and institutional change in a wide variety of countries (not including the United States). Alex Cukierman (1998), who knows more about this subject than almost anyone else, has taken note of the strong worldwide trend toward greater central bank independence: Since 1989, more than two dozen countries have increased the independence of their central banks substantially. It seems that none have moved...

  10. Conclusion: Thoroughly Modern Central Banking
    (pp. 98-100)

    Inertia has always been a powerful force in the staid world of central banking, and it still is. So rapid change in the ways in which monetary policy is conducted and in which central banks are managed should be neither expected nor desired. There are good reasons, some of which I have mentioned in this book, for central banks to resist the latest fads and fancies. Yet motion in several more modern directions has been palpable in recent years—even if it proceeds at a glacial pace. Hence the phrase “quiet revolution.”

    The three aspects of change in modern central...

  11. Notes
    (pp. 101-108)
  12. Bibliography
    (pp. 109-114)
  13. Index
    (pp. 115-120)