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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

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Charles Goodhart

It was some fifty years ago, when Harry Johnson came to the LSE and established his monetary seminar there, that Vicky Chick and I first met, and have remained friends and colleagues ever since. During these fifty years there have been several regime changes in monetary management. The Bretton Woods system of pegged exchange rates gave way in 1971–72 to a rather inchoate non-system of regional pegging (or fixing as in the euro-zone) combined with a – somewhat managed – float between major currencies. So, until the early 1970s, only the Fed in the USA had to concern itself with the principles, regime and rules for managing its domestic monetary system.

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Charles Goodhart

In the aftermath of the financial crisis financial stability considerations have become more prominent in central banks’ policies and require substantial discretion in their implementation. We argue that transparency can serve as an instrument for central banks to balance the conflicting interests of different stakeholders and manage market participants’ expectations, explain their strategy and report on its implementation progress and receive comments and feedback by stakeholders. In view of the increasingly contested concept of central banks’ independence, we show that increasing and institutionalizing ex ante and ex post transparency on policy decisions and their implementation strengthen central banks’ accountability as a key ingredient and prerequisite for their independence. Finally, we hold that central banks’ new responsibilities for financial stability call for the development of a more comprehensive and inclusive approach given their strong impact on private actors and their linkages with other policy fields and governmental agencies.

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Charles Goodhart

The tightening of bank regulation from October 2008 included a massive increase in capital/asset ratios in the leading nations. This may have been needed to restore banks’ credit-worthiness, notably in inter-bank dealings. However, the consequent ‘deleveraging’ was one reason that a surge in the monetary base did not lead – as the textbooks envisaged – to a corresponding surge in the quantity of money, broadly defined. Monetary policy did not work as expected.