Central Banking in Theory and Practice
Alan S. Blinder offers the dual perspective of a leading academic macroeconomist who served a stint as Vice-Chairman of the Federal Reserve Board—one who practiced what he had long preached and then returned to academia to write about it. He tells central bankers how they might better incorporate academic knowledge and thinking into the conduct of monetary policy, and he tells scholars how they might reorient their research to be more attuned to reality and thus more useful to central bankers.
Based on the 1996 Lionel Robbins Lectures, this readable book deals succinctly, in a nontechnical manner, with a wide variety of issues in monetary policy. The book also includes the author's suggested solution to an age-old problem in monetary theory: what it means for monetary policy to be "neutral."
Like wrestlers flexing their muscles before a bout that somehow never seems to take place, economists have been declaiming their intention to do something about bounded rationality for more than thirty years. The appearance of this elegant book signals that the big fight is under way at last.
Ken Binmore, ELSE, University College London
What would it be like to have a central banker who is a master macroeconomist, a clear thinker and expositor, and a reasonable person? Answer: it would be wonderful. And here he is.
Robert M. Solow, Institute Professor Emeritus, Department of Economics, MIT
In three short, birlliant essays, Professor Blinder summarizes and advances our knowledge of both the theory and practice of central banking.
Edward Yardeni, Chief Economist and Managing Director, Deutsche Morgan Grenfell
The power of this book comes from the fact that it shows how a first-rate academic macroeconomist comes to terms with some problems of practical monetary policy. There are only a very few economists in the world who could produce such a work.
Marvin Goodfriend, University of Virginia
What is enlightened Federal Reserve policy? What are the concrete details of its theory? How does the Federal Open Market Committee know where to set the level of interest rates? How did they manage to conquer inflation? You can't easily find answers to these questions in the speeches of Fed Chairman or Governors. One can't easily find answers to these questions in the scholarly economic literature. If one seeks to learn from the scholarly economic literature, one must realize that important ideas are from papers written decades ago as well as from papers written recently. And one must take all of these sources with a healthy dose of skepticism. Alan Blinder, former Vice Chairman of the Board of Governors of the Federal Reserve System, pulls all these elements of a theory of practical monetary policy together, and explains it candidly and well.
This is a book for people who really want to know the practical theory that lies behind the formulation of the best Fed policy.
Robert J. Shiller, Cowles Foundation, Yale University
Blinder possesses the uncommon skill of translating his real life experience as a key central banker into the modern day rigor of macro economics. A must read for anyone who wants to understand the dramatic and increasingly complex evolution in the art of central banking.
Stephen S. Roach, Chief Economist and director of Global Economics, Morgan Stanley Dean Witter
This brief exposé of central banking and monetary policy...should be required reading for all those, specialists and nonspecialists alike, interested in those subjects.
Finance and Development