Central Banking: Theory and Practice in Sustaining Monetary and Financial Stability

Chapter 14Future Central Banking Strategy and Its Execution

Learning Objectives

1. Describe the concept of central banking strategy.
2. Identify what might have proven to be bad central banking strategies.
3. Identify how central banking strategies might have changed in the wake of the 2007–2010 global financial crisis.
4. Explain how a central bank might better meet future challenges by improving its analytical capacity.
5. Explain how a central bank might better meet future challenges by improving its organizational capacity.
6. Explain how a central bank might better meet future challenges by improving its political capacity.

In Chapter 13, we discussed three major forces that might shape the future economic and financial landscape that central banks operate in. Since these forces could interact in ways that are unpredictable, if central banks are to succeed in the ever-changing landscape, they will have to be flexible, nimble, and adapt their operations to a fluid environment. In Chapter 14 we propose using a framework based on public policy literature, which central banks could adopt to enhance their capacity to effectively navigate changes in the environment and successfully deliver value to society.

14.1 CENTRAL BANKING STRATEGY

To successfully deal with the future challenges described in Chapter 13, central banks will need to carefully consider their strategies in pursuing their mandates. As a public sector entity, however, a central bank will consider strategy differently than a ...