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Central Banking, Monetary Theory and Practice

Essays in Honour of Charles Goodhart, Volume One

Edited by Paul Mizen

Celebrating the contribution that Charles Goodhart has made to monetary economics and policy, this unique compendium of original papers draws together a highly respected group of international academics, central bankers and financial market regulators covering a broad range of issues in modern monetary economics. Topics discussed include: central bank independence; credibility and transparency; the inflation forecast and the loss function; monetary policy experiences in the US and the UK; the implications of Goodhart’s Law; the benefits of single versus multiple currencies; and money, near monies and credit.
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Chapter 3: The use and meaning of words in central banking: inflation targeting, credibility and transparency

Benjamin M. Friedman


3. The use and meaning of words in central banking: inflation targeting, credibility and transparency Benjamin M. Friedman* 1. INTRODUCTION Charles Goodhart is the Samuel Johnson of monetary policy. Few people in the field have written more. Few have written in more genres: in Goodhart’s case, scholarly research papers expanding the frontier of the subject; practical analyses illuminating the policy problems of the day; memoranda, including many never published, for circulation within the central bank; even textbooks for educating future generations of economists and central bankers. Few people have written works of greater quality, or with greater effect on how one’s readers think and act. And like Johnson (or so the historical accounts tell us), Charles Goodhart exhibits – how to put the matter delicately? – a plethora of personal eccentricities that are as endearing to his countless friends as they must be baffling to anyone who merely observes him at a distance. Goodhart’s career spans an extraordinary period of development in both the thinking and the practice of monetary policy. Notwithstanding the many false starts in both thinking and practice – and there have been many – few informed persons would doubt that both are in far better condition today than they were four decades ago. Especially with respect to the making of actual monetary policy, and especially in a volume like this one, a certain amount of self-congratulation would certainly be in order. But problems remain nonetheless, including problems stemming directly from the most recent series of advances. As...

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