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Central Banking in challenging times

Author(s): Claudio Borio

Date published: Nov 2019

SUERF Policy Note, Issue No 114
by Claudio Borio, Bank for International Settlements and SUERF Fellow

JEL-codes: E5.
Keywords: Central bank independence, globalisation, business cycles, fiscal dominance.

SUERF Annual Lecture 2019 held by Claudio Borio during the SUERF/BAFFI CAREFIN Centre Conference on “Populism, Economic Policies and Central Banking” in Milan, on 8 November 2019. Video available here.


Since the Great Financial Crisis, central banks have been facing a triple challenge: economic, intellectual and institutional. The institutional challenge is that central bank independence - a valuable institution - has come in for greater criticism. This essay takes a historical perspective and draws parallels with the previous waxing and waning of central bank independence. It suggests that this institution is closely tied to globalisation, as both spring from the same fountainhead: an intellectual and political environment that supports an open system in which countries adhere to the same principles and governments remain at arm′s length from the functioning of a market economy. This suggests that the fortunes of independence are also tied to those of globalisation. The essay then proceeds to explore ways that can help safeguard independence. A key one is to narrow the growing expectations gap between what central banks are expected to deliver and what they can actually deliver. In that context, it also considers and dismisses the usefulness of recently proposed schemes that involve controlled deficit monetisation.

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SUERF Policy Note, Issue No 114SUERF Policy Note, Issue No 114

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