Book contents
- The Money Minders
- The Money Minders
- Copyright page
- Contents
- Figures
- Preface
- Acknowledgements
- 1 Of Gold and Paper Money
- 2 The Great Depression and Its Legacy
- 3 Fine-Tuning Out of Control
- 4 A Science of Monetary Policy
- 5 Where the Great Experiment Went Wrong
- 6 The New Art of Central Banking
- Epilogues
- Epilogue 1: Why Forecast?
- Epilogue 2: Monetary Policy in Troubled Times
- A Final Word
- References
- Index
Epilogues
Published online by Cambridge University Press: 17 February 2022
- The Money Minders
- The Money Minders
- Copyright page
- Contents
- Figures
- Preface
- Acknowledgements
- 1 Of Gold and Paper Money
- 2 The Great Depression and Its Legacy
- 3 Fine-Tuning Out of Control
- 4 A Science of Monetary Policy
- 5 Where the Great Experiment Went Wrong
- 6 The New Art of Central Banking
- Epilogues
- Epilogue 1: Why Forecast?
- Epilogue 2: Monetary Policy in Troubled Times
- A Final Word
- References
- Index
Summary
These two epilogues present practical applications of money minder thinking to two major policy problems that faced the UK and the world in 2016 and then in 2020. The long march to increased globalisation that would lead to “increased shares for all” from trade juddered to a halt following the financial crisis and, given sluggish economic growth subsequently, opened up a debate about the true costs of economic openness, particular to labour flows. This manifested itself in the UK as a push for referendum on continued membership of the EU. Much of the debate in the run up to the referendum and subsequently once the people had spoken was on the likely, or forecasted, economic effects of a decision to leave. The debate then rapidly descended into a search for clues as to whether the fears or gains from leaving had been exaggerated by popular forecasting narratives. And indeed whether we should rely on the views of ‘experts’. The first epilogue, written in early 2017, thus confronts the value of economic forecasting against the sharp focus of a country trying to understand to what it had just agreed. The money minder needs to tell a number of stories that are consistent within their own terms, that is the purpose of a model. But as she cannot really know which story will unfold, she, as a consequence of outlining these stories, also has to be prepared to respond to any of the outcomes. And so this is the message of the second epilogue, written in the spring of 2020 just as the magnitude of the COVID-19 pandemic was becoming clearer. Here I make the money minder case for supporting fiscal policy by helping to create fiscal space with lower funding costs and absorbing any excess issuance of public debt. This was a “once-in-a-century” shock and outside the distributions beloved by econometricians and yet precisely the time that monetary policy – if credibly committed to price stability – could provide support to the functioning of markets and provide support for an economy in temporary free-fall. But with a clear eye on how to do so without undermining long price and monetary stability. For which the eye may need the support of a commitment to exit from extraordinary measures when we recovered. The absence of that clear commitment will test credibility increasingly as the recovery builds momentum and price pressures build. The critical ability to act flexibly if hemmed in by hard won credibility and can disappear with it, depressingly easily.
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- The Money MindersThe Parables, Trade-offs and Lags of Central Banking, pp. 171 - 172Publisher: Cambridge University PressPrint publication year: 2022