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Central Banking in the Modern World

Alternative Perspectives Edited by Marc Lavoie, University of Ottawa, Canada and University of Paris 13, France and Mario Seccareccia, Professor of Economics, University of Ottawa, Canada and Editor, International Journal of Political Economy
According to the New Consensus in monetary economics, monetarism is dead and central bankers target low inflation rates by acting upon short-term real rates of interest. Yet, this synthesis hinges on variants of the long-run vertical Phillips curve originally proposed by Milton Friedman, the father of old-line monetarism. Contributors to this volume question this New Consensus. While they agree that the money supply should be conceived as endogenous, they carefully examine the procedures pursued by central banks, the monetary policy transmission mechanisms suggested by central bankers themselves, and the assumptions imbedded in the New Consensus. They propose alternative analyses that clearly demonstrate the limits of modern central banking and point to the possible instability of monetary economies.
Extent: 320 pp
Hardback Price: $146.00 Web: $131.40
Publication Date: 2005
ISBN: 978 1 84376 641 4
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  • Economics and Finance
  • Money and Banking
  • Post-Keynesian Economics
Monetarism is dead! Central bankers are all Wicksellians now! They target low inflation rates, with no regard to monetary aggregates whatsoever, by acting upon short-term real rates of interest. This is the New Consensus in monetary economics, or simply the New Keynesian Synthesis. Yet, this synthesis still hinges on variants of the long-run vertical Phillips curve originally proposed by Milton Friedman, the father of old-line monetarism.

Contributors to the volume question this New Consensus. While they agree that the money supply should be conceived as endogenous, they carefully examine the procedures pursued by central banks, the monetary policy transmission mechanisms suggested by central bankers themselves, and the assumptions imbedded in the New Consensus. They propose alternative analyses that clearly demonstrate the limits of modern central banking and point to the possible instability of monetary economies.

Heterodox and orthodox monetary macroeconomists alike will find this illuminating book of great interest.
‘All chapters are equally and well structured with the general conclusions leading from each part clearly summarised in the introductory section which makes the book pleasant to read.’
– Pelin Ilbas, Tijdschrift voor Economie en Management

‘The book provides a good variety of articles capable of satisfying different readers regarding central banking.’
– Eric Tymoigne, Journal of Economic Issues
Contributors: P. Arestis, R.W. Dimand, C.H. Dos Santos, J. Knodell, M. Lavoie, T.I. Palley, M.-A. Pigeon, R.E. Prasch, L.-P. Rochon, S. Rossi, R. Rowley, T.K. Rymes, M. Sawyer, M. Seccareccia, M. Setterfield, J. Smithin, B. Spotton Visano, G. Zezza
Contents: Introduction Part I: The New Consensus 1. The New Consensus on Monetary Policy Seen from a Post-Keynesian Perspective 2. Central Banking, Stability and Macroeconomic Outcomes: A Comparison of New Consensus and Post-Keynesian Monetary Macroeconomics 3. Interest Rate Operating Procedures and Income Distribution 4. Monetary Policy when Money is Endogenous: Going Beyond the ‘New Consensus’ Part II: Transmission Mechanisms 5. Monetary Dialogue and Dogma at the Bank of Canada: Inside 6. Interest Rate Policy at the Bank of Canada: Setting the Agenda 7. Modern Central Banks Only Have Real Effects 8. Central Banking in the Monetary Circuit 9. Long-term Interest Rates, Liquidity Preference, and the Limits of Central Banking 10. The Role of Monetary Policy in Post-Keynesian Stock-flow Consistent Macroeconomic Growth Models Part III: Historical Perspectives 11. The Effectiveness of Monetary Policy in Open Economy Macroeconomics: Dornbusch versus Tobin 12. Minsky and Tobin on the Instability of a Monetary Economy 13. Considerations on Allan H. Meltzer’s History of the Federal Reserve 14. Central Banking in Early Industrialization Index