Introductory description

This module aims to explore and explain why (in terms of fundamental policy objectives and economics) central banks have different mandates, objectives, governance and operating procedures and thereby to open minds to the scope of possible policy choices.

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

1. Comparing Mandates and objectives. Degrees of independence.
2. Conventional Monetary Policy comparisons: (different) inflation targets; exchange rate regimes;
3. Balance sheet management; assets and liabilities; incl banknotes; cb finances
4. Operations: how interest rates are set in the market; commercial bank reserves; operational frameworks and choices; Islamic finance for central banks. Collateral.
5. Unconventional Monetary Policy: Quantitative and Credit Easing in different forms; negative rates; bank funding schemes; market maker of last resort. Forward guidance and communications.
6. Exchange rates and reserves management: how fx markets work; fx reserves; exchange rate policies; gold; IMF/SDRs.
7. Financial Stability: different governance arrangements; capital flows; crisis management.
8. Prudential Supervision and regulation: different arrangements; the Basel Capital regime.
9. Lender of last Resort and Emergency Liquidity Assistance. Different arrangements; fx swaps between central banks.
10. Other regulatory issues: conduct; fair and effective markets; payments.

Learning outcomes

By the end of the module, students should be able to:

• Demonstrate an in depth understanding of comparative central banking.
• Demonstrate an ability to consume and understand detailed investigation and research into relevant central banking and financial regulation issues.
• Integrate theory and practice relevant to a wide range of central banking and financial regulation practices and relevant functions in different contexts.
• To understand why (in terms of fundamental policy objectives and economics) central banks have different mandates and operating practices, eg as concerns monetary policy regimes .
• Demonstrate a critical awareness of research and advanced scholarship in the area of comparative central banking.
• Reflect on and learn from some prior experience and thus be able to integrate new knowledge with past experience and apply it to a new situation.
• Make sound judgements whilst understanding the limitations on judgements made in the absence of complete data.

Indicative reading list

BIS - Rethinking Lender of Last Resort https://www.bis.org/publ/bppdf/bispap79.htm
BIS - Monetary policy frameworks and central bank market operations (Compendium) https://www.bis.org/publ/mktc04.htm
BIS - The main features of the monetary policy frameworks of the Bank of Japan, the Federal Reserve and the Eurosystem https://www.bis.org/publ/bppdf/bispap09b.pdf
BIS - Foreign exchange market intervention: methods and tactics https://www.bis.org/publ/bppdf/bispap24d.pdf
BIS - Central bank operating frameworks and collateral markets https://www.bis.org/publ/cgfs53.htm
BIS - Central Bank Cryptocurrencies https://www.bis.org/publ/qtrpdf/r_qt1709f.pdf
FSB - Financial Stability Implications from FinTech http://www.fsb.org/wp-content/uploads/R270617.pdf
FED - James McAndrews: Negative nominal central bank policy rates – where is the lower bound? https://www.newyorkfed.org/newsevents/speeches/2015/mca150508.html
Bank of Finland - Central bank liquidity operations during the financial market and economic crisis: observations, thoughts and questions https://helda.helsinki.fi/bof/bitstream/handle/123456789/7963/167925.pdf;jsessionid=DF9000035550BE567B16DB654E210E12?s equence=1
Danmarks Nationalbank - Fixed Exchange Rate Policy in Denmark https://www.nationalbanken.dk/en/publications/Documents/2014/03/Fixed_MON1_2014.pdf
Bindseil (ECB) - Evaluating monetary policy operational frameworks https://www.kansascityfed.org/~/media/files/publicat/sympos/2016/econsymposium-bindseil-paper2.pdf?la=en IMF - Central Bank Response to the 2007–08 Financial Market Turbulence : Experiences and Lessons Drawn https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Central-Bank-Response-to-the-200708-Financial-Market-TurbulenceExperiences-and-Lessons-Drawn-22313
IMF - Virtual Currencies and Beyond: Initial Considerations, & Fintech and Financial Services: Initial Considerations http://www.imf.org/en/About/Key-Issues/Fintech#Staff%20Discussion%20Notes
IMF - The Lender of Last Resort Function after the Global Financial Crisis www.imf.org/external/pubs/ft/wp/2016/wp1610.pdf
IMF - Central Bank Emergency Support to Securities Markets http://www.imf.org/~/media/Files/Publications/WP/2017/wp17152.ashx Swedish Riksbank - How much equity does a central bank need? http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.487.7957&rep=rep1&type=pdf Buiter - “Dysfunctional Central Banking; The End of Independent Central Banks or a Return to ‘Narrow Central Banking’ – or Both?" https://willembuiter.com/Executive%20summary.pdf (summary version, actual paper available here http://www.citivelocity.com/t/eppublic/10lax)

Subject specific skills

Draw on a range of concepts, information, techniques and perspectives in the area of comparative central banking.

Transferable skills

Written communication
Independent learning.