Central Bank Independence, Regulations, and Monetary Policy (eBook)

Ranajoy Ray Chaudhuri is Assistant Professor of Economics at Muhlenberg College, USA, where he teaches courses in Macroeconomics and Monetary Economics, Development Economics, and Finance.  He has also taught at The Ohio State University, Princeton University, and St. Mary’s College of Maryland, and at several universities in China and Mexico. He is the author of The Changing Face of American Banking: Deregulation, Reregulation, and the Global Financial System (2014). Dr. Ray Chaudhuri received his PhD in Economics from The Ohio State University in 2012.

Acknowledgments 5
Contents 7
List of Figures 13
List of Tables 14
Chapter 1: Introduction 15
1.1 The Origins of Banking 15
1.2 The Pioneers in Central Banking 17
1.2.1 The Netherlands 17
1.2.2 Sweden 17
1.2.3 United Kingdom 18
1.2.4 Spain 20
1.2.5 France 20
1.2.6 Other European Pioneers 21
Chapter 2: The Idea of Central Bank Independence 23
2.1 The Advantages and Drawbacks of Central Bank Independence 23
2.2 Types of Central Bank Independence 25
2.3 Central Bank Independence Across the World 27
Bibliography 33
Chapter 3: The United States of America 35
3.1 Central Banking in the Pre-Federal Reserve Era 35
3.2 The Panic of 1907 and the National Banking Commission 38
3.3 The Federal Reserve Act and the Federal Reserve System 41
3.4 The Administrative Structure of the Federal Reserve System 48
3.4.1 The Federal Reserve Banks 48
3.4.2 The Board of Governors 50
3.4.3 The Federal Open Market Committee 51
3.5 The History of the Federal Reserve System 54
3.5.1 The Early Years 54
3.5.2 The Discovery of Open Market Operations 56
3.5.3 The Great Depression 56
3.5.4 The Accord of 1951 57
3.5.5 Monetary Policy Targets 58
3.5.6 The Evolution of the Federal Reserve’s Macro Models 60
3.6 The Autonomy of the Federal Reserve Bank 64
Chapter 4: The United Kingdom 70
4.1 The History of the Bank of England 70
4.1.1 The First Two Centuries 70
4.1.2 The World Wars 73
4.1.3 The Post-War Years 75
4.1.4 The Impact of Brexit 78
4.2 Monetary Systems Outside England and Wales 81
4.2.1 Currencies in Scotland and Northern Ireland 81
4.2.2 Currencies in the British Crown Dependencies 82
4.2.3 Currencies in the British Overseas Territories 83
4.3 The Administrative Structure of the Bank of England 84
4.4 The Functions of the Bank of England 86
4.5 The Autonomy of the Bank of England 88
Chapter 5: Germany and the European Central Bank 95
5.1 The Reichsbank 95
5.2 The Deutsche Bundesbank 97
5.2.1 The History of the Deutsche Bundesbank 97
5.2.2 The Administrative Structure of the Deutsche Bundesbank 99
5.2.3 The Functions of the Deutsche Bundesbank 101
5.2.4 The Autonomy of the Deutsche Bundesbank 103
5.3 The European Central Bank and the European System of Central Banks 105
5.3.1 The History and Administrative Structure of the European Monetary Authorities 105
5.3.2 Monetary Policy of the Eurozone 111
5.3.3 The Autonomy of the European Central Bank 112
5.4 The Euro 114
5.4.1 The History of the Euro 114
5.4.2 The Euro Outside the Official Eurozone 116
5.4.3 Currencies Pegged to the Euro 122
Bibliography 129
Chapter 6: Greece 130
6.1 The Greek Origins of Standardized Coinage 130
6.2 Greek Central Banking Before the Bank of Greece 132
6.3 The Bank of Greece 134
6.3.1 The History of the Bank of Greece 134
6.3.2 The Administrative Structure of the Bank of Greece 137
6.3.3 The Functions of the Bank of Greece 141
6.3.4 The Autonomy of the Bank of Greece 146
6.4 The Greek Sovereign Debt Crisis 148
Chapter 7: The Russian Federation 153
7.1 Central Banking Before the Russian Federation 153
7.1.1 Central Banking in the Russian Empire 153
7.1.2 Central Banking in the Soviet Union 155
7.2 Central Banking in the Russian Federation 158
7.2.1 The History of the Bank of Russia 158
7.2.2 The Administrative Structure of the Bank of Russia 160
7.2.3 The Functions of the Bank of Russia 163
7.2.4 Autonomy of the Bank of Russia 169
7.3 The Currency of the Russia Federation 170
7.3.1 The Ruble During Imperial Russia 170
7.3.2 The Ruble During the Soviet Era 171
7.3.3 The Ruble During the Russian Federation Era 172
Chapter 8: India 176
8.1 The Origins of Central Banking in India 176
8.2 The Indian Rupee 178
8.2.1 The Currency System of British India 178
8.2.2 Currencies of Other European Colonies in India 180
8.2.3 Currencies of Princely States 182
8.2.4 The Currency System in Post-Independence India 184
8.3 The Administrative Structure and Functions of the Reserve Bank of India 187
8.3.1 Administrative Structure of the Reserve Bank of India 187
8.3.2 Functions of the Reserve Bank of India 198
8.3.3 Autonomy of the Reserve Bank of India 204
8.4 Subsidiaries of the Reserve Bank of India 206
8.4.1 The Deposit Insurance and Credit Guarantee Corporation of India 206
8.4.2 The Bharatiya Reserve Bank Note Mudran Private Limited 209
8.4.3 The National Housing Bank 212
8.5 The Demonetization Experiment 214
8.6 The Indian Rupee Outside India 216
8.6.1 Nepal 216
8.6.2 Bhutan 219
8.6.3 Other Countries with the Indian Rupee As Legal Tender 221
8.6.4 Taking Indian Rupees Out of the Country 222
Bibliography 230
Chapter 9: China 231
9.1 Chinese Banking Before the People’s Republic of China 231
9.1.1 Banking in China Before a De Facto or De Jure Central Bank 231
9.1.2 Bank of China 232
9.1.3 Central Bank of China 234
9.2 The People’s Bank of China 235
9.2.1 The History of the People’s Bank of China 235
9.2.2 Administrative Structure of the People’s Bank of China 236
9.2.3 Functions of the People’s Bank of China 239
9.2.4 Autonomy of the People’s Bank of China 244
9.2.5 The Currency of the People’s Republic of China 246
9.2.6 The Historical Currencies of Tibet and Xinjiang 248
9.3 The Special Administrative Regions: Hong Kong and Macau 249
9.3.1 Hong Kong S.A.R. 249
9.3.2 Macau S.A.R. 252
9.4 The Republic of China (Taiwan) 254
9.4.1 Central Banking in the Republic of China (Taiwan) 254
9.4.2 Autonomy of the Central Bank of the Republic of China (Taiwan) 256
9.4.3 Currency of the Republic of China (Taiwan) 257
Bibliography 262
Chapter 10: Japan 263
10.1 The Japanese Financial System in the Days Before the Meiji Restoration 263
10.2 The Establishment of the National Banks 265
10.3 The Bank of Japan 267
10.3.1 The History of the Bank of Japan 267
10.3.2 The Administrative Structure of the Bank of Japan 269
10.3.3 The Functions of the Bank of Japan 270
10.3.4 Autonomy of the Bank of Japan 278
10.4 The Currency of Japan 278
10.4.1 The Pre-Yen Days 278
10.4.2 The New Currency Act of 1871 and the Yen 279
10.4.3 The Japanese Military Yen 280
10.4.4 The Currencies of the Japanese Puppet States and Occupied Territories 281
10.4.5 The Currency of the Ryukyu Kingdom 282
Bibliography 285
Chapter 11: Brazil 286
11.1 The Brazilian Monetary System During the Pre-Central Bank Era 286
11.2 Brazilian Central Banking Under Banco do Brasil 288
11.3 Brazilian Central Banking Under Banco Central do Brasil 291
11.3.1 The History of Banco Central do Brasil 291
11.3.2 The Administrative Structure of Banco Central do Brasil 292
11.3.3 The Functions of Banco Central do Brasil 293
11.3.4 Inflation and Brazilian Currency Reforms 299
11.3.5 The Autonomy of Banco Central do Brasil 301
Chapter 12: South Africa 306
12.1 Banking in Pre-Independence and Early Post-Independence South Africa 306
12.2 Central Banking in Early Post-Independence South Africa 307
12.2.1 The Establishment of the South African Reserve Bank 307
12.2.2 The End of the Gold Standard in South Africa 309
12.2.3 The Structure and Ownership of the South African Reserve Bank 309
12.2.4 Subsidiaries of the South African Reserve Bank 313
12.2.5 The History of South African Coins and Bank Notes 315
12.3 The Bretton Woods System Years 319
12.4 The Post-Bretton Woods Years 322
12.5 The Current Inflation Targeting Framework and Central Bank Autonomy 323
12.5.1 The Implementation of the Inflation Targeting Framework 323
12.5.2 Central Bank Independence in South Africa 331
12.6 The Multilateral Monetary Area 331
12.6.1 The Origins of the Multilateral Monetary Area 331
12.6.2 Namibia 334
12.6.3 Lesotho 338
12.6.4 Swaziland 341
12.7 Zimbabwe and the South African Rand 344
Chapter 13: Conclusion 352
13.1 The Relationship Between Central Bank Independence and Inflation 352
13.2 The Relationship Between Central Bank Independence and Real Macroeconomic Variables 355
Bibliography 360
Bibliography 362
Index 389