Adding rooms onto a house we love: Central banking after the global financial crisis

Abstract

This article examines the extent to which central bankers have been willing and able to rethink their beliefs about monetary policy in the wake of the global financial crisis. We show that despite the upheaval, the core pre‐crisis monetary policy paradigm remains relatively intact: central bankers believe that they should primarily pursue price stability through targeting a low inflation rate in a transparent manner, and that they need operational independence in order to achieve this goal. In a bid to address post‐crisis conditions and maintain their credibility, however, central bankers have also layered new elements onto this paradigmatic core. We document both the resilience of pre‐crisis beliefs and the process of layering using computer‐assisted text analysis and qualitative analysis of 13,586 speeches given between 1997 and 2017 by central bankers from around the world.

Communicating financial stability in monetary policy reports: a text-mining experiment in postcommunist countries

“…Another, although quite small, strand of literature analyses the content (quality and quantity) of monetary policy communication. The study most similar to ours is probably that by Johnson, Arel‐Bundock, and Portniaguine (2019), who analyzed the content of speeches from the BIS database given by central bankers worldwide between 1997 and 2017. Johnson et al.…”

“…Therefore, we can only partially confirm that the GFC led to an increased, but short-lived focus on financial stability in central banks’ monetary communication (Q2), as underlined by Siklos et al. (2018), Johnson et al. (2019) and Alfieri and Gabrielyan (2021).…”

Which dimensions of culture matter for central bank independence? International evidence

“…First, central bank independence does not develop in a vacuum, and it is driven by pressures that can take the form of social and cultural rules (Lawrence & Shadnam, 2008; Makrychoriti & Pasiouras, 2021). Central banks choose to fit cultural rules to build and maintain their reputation with the public, and thus, the independence of central banks is determined by cultural and social norms (Johnson et al, 2019; McPhilemy & Moschella, 2019; Moschella & Pinto, 2019). Second, institutional regimes and governments are chosen by the members of organizations (countries).…”

Central banks under stress: Reputation, accountability and regulatory coherence

“…Many of the reputational, accountability and regulatory challenges central banks have grappled with since the financial crisis will be familiar to public agencies operating in other spheres. For example, as the articles by Moschella and Pinto () and Johnson et al () attest, notwithstanding their independence, central banks are sensitive to the need to build and maintain their reputation with the public, and they will shape their behaviour accordingly. What central banks are sensitive about, and how they respond to those sensitivities, will be of interest not only to political economists, but also scholars interested in theories of bureaucratic reputation.…”