Central Banking in Theory and Practice

A study of how central bankers might better incorporate academic knowledge and thinking into monetary policy and how scholars can reorient their research to be more attuned to reality. A variety of monetary policy issues are explored and examined from both an academic and practical point of view.

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In this text the author tells central bankers how they might better incorporate academic knowledge and thinking into the conduct of monetary policy and tells scholars how they might reorient their research to be more attuned to reality and thus more useful to central bankers. Based on the 1996 Lionel Robbins lectures the book deals, in a non-technical manner, with a variety of issues in monetary policy including the goals of monetary policy, the choice of monetary instrument, the rule-versus-discretion debate, suggested remedies for the alleged problem "inflationary bias", central bank credability, arguments for and against central bank independence and the interplay between the central bank and financial markets. The author examines each issue from the point of view of both academic economist and practicing policymaker and calls attention to the differences and similarities of perspective along the way. The book also includes the author's suggested solution to an age-old problem in monetary theory: what it means for monetary policy to be "neutral".