Archive for October 25th, 2013

From fighting for Central bank independence to restraining central bankers

October 25, 2013

The late Prof. Albert Hirschman thrived on analysing paradoxes and that was his forte. His works hence make for a fascinating reading as it tells you one can never be sure about any situation. There are contradictions everywhere.

And what paradoxical times we are living in and nothing better to see it from central banking perspective which is just about figuring paradoxes. So on one hand we are talking about fighting for central bank independence (which is getting abused in many a ways) but at the same time we want to restrain central bankers.

  • The crisis first saw how central bankers moved into quasi-fiscal policy space,
  • then the government pushed central banks into doing a lot more as economies struggled bringing central bank independence into question
  • Now as we see this tapering thing, the power of central bankers are coming to the fore,

So how do we manage these two does one put a central banker on board which does justice to the independence but at the same time his/her powers are restrained..

So there are these two articles. First by Marcel Fratzscher , a former head of International Policy Analysis of ECB. Second by Luigi Zingales of U Chicago.

First Fratzscher:


How RBA discovered its financial stability mandate post-2008 crisis?

October 25, 2013

RBA released its Statement on the Conduct of Monetary Policy. This is released once in every three years. It is a kind of a joint statement by the central bank and Aus treasury on common understanding between the two on mon pol in Aus:


Linking US debt ceiling crisis in 2012-13 to Spain’s similar crisis in 1575..

October 25, 2013

Fascinating history again.. Carlos Álvarez-Nogal and Christophe Chamley point how the recent debt ceiling crisis has parallels way back in Spain in 1575:

The recent showdown over the US debt ceiling can be thought of as a game of chicken over the repayment of sovereign debt, with potentially severe consequences. This column describes an analogous historical episode in Spain, in which city delegates in the Cortes resisted tax increases, and Phillip II responded by suspending payments on a portion of the sovereign debt. By the time the cities caved to a doubling of their tax contribution two years later, the resulting bank failures and credit freeze had caused lasting economic damage.

The write-up could have been a little simpler though. Gets complicated to figure..

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