A research department is now a core element of any modern central bank. This was not always the case. The growth of research departments in central banks is closely related to their transformation from issuing banks, with more commercial tasks mainly relating to discount credit, into modern monetary authorities. It is also related to the need for the management of the monetary system, especially after the demise of the Gold Standard.

Moreover, the growth of research departments, not only in central banks, is an expression of the growing importance of a more systematic and scientific approach in modern society. In the European Union, the importance of academic research for central banks was reinforced by the creation of the European Central Bank, which started operating in June 1998.

Two elements are clearly important for any modern central bank research department: contributing to monetary policy-making and sustaining a dialogue with the academic community. Research departments fulfil very much a bridging function between monetary policy-making and the academic world. This is more or less a constant in the history of central banks.

As part of a pluralist approach towards research, historical research can have important benefits.

Firstly, a historical perspective can offer insights into the relative strengths and weaknesses of  economic theories. Theories are techniques of thinking and remain partial. So, it is important to select theories which highlight the relevant features of reality. The great Austrian economist Joseph Schumpeter approvingly referred to Jules Henri Poincaré’s observation, “tailors can cut suits as they please; but of course they try to cut them to fit their customers”.

Secondly, for policy-makers, the policy regime is of crucial importance. Sometimes, one tends to take the policy regime as given, rather
ignoring that a change in regime will affect economic events and policy outcomes. At other moments, on the contrary, there are heated discussions about the policy framework.

In both cases, thorough economic research can help central bankers to build a robust economic policy framework. A broad historical approach, which can offer some distance and a wider variety of experience, has a role to play.