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Monetary History, Exchange Rates and Financial Markets

Essays in Honour of Charles Goodhart, Volume Two

Edited by Paul Mizen

Monetary History, Exchange Rates and Financial Markets is an impressive collection of original papers in honour of Charles Goodhart’s outstanding contribution to monetary economics and policy. Charles Goodhart has written extensively on many of these topics and has become synonymous with his field; the chapters within this book offer a summary of current thinking on his own research subjects and include perspectives on controversies surrounding them.
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Chapter 9: Is there a Goodhart's Law in financial regulation?

Andrew Sheng and Tan Gaik Looi


9. Is there a Goodhart’s Law in financial regulation? Andrew Sheng and Tan Gaik Looi* 1. INTRODUCTION I am very grateful to be invited to this Festschrift in honour of Professor Charles Goodhart. As another doyen of central banking, Gerry Corrigan likes to say, a man may leave central banking, but his heart never leaves central banking. As a young central banker who learnt his craft in the developing world under the late and legendary Tun Ismail Mohd Ali of Bank Negara Malaysia, I met Charles at one of the Commonwealth Central Bankers’ meetings in the late 1970s. This used to be hosted by the Bank of England in the Oak Room just before the BIS Annual Meetings. I remember asking Charles one of those naïve questions on interest rate policy, for which I got a clear thoughtful answer that provoked my thinking for the rest of the trip. My next encounter with Charles was reading his book on Money, Information and Uncertainty. Our paths crossed again in Hong Kong in 1993, when I assumed duties at the Hong Kong Monetary Authority. Charles was not only a member of the Exchange Fund Advisory Committee, but was also one of the founders of the Hong Kong Link to the US dollar, commonly called ‘the peg’. He was asked by the Bank in the dire days of 1983 to advise on what to do to stabilise the Hong Kong dollar in the politically volatile period of Anglo-Chinese discussions on the future...

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