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Charles Goodhart (1936–)

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Abstract

Charles Goodhart has made major contributions to the study of financial markets and macroeconomics, pioneering the integration of those two disciplines and applying his insights to the structure and practice of central banking. Goodhart served at the Bank of England in the 1970s and 1980s and as a policy maker on the Monetary Policy Committee (MPC). Along with Mervyn King, he founded and led the Financial Markets Group (FMG) at LSE, which has helped to ground the study of financial markets in actual practice. He foresaw many of the issues that led to the 2008 global financial crisis (GFC), has made a number of suggestions for preventing a repeat and has commented extensively on the strengths and weaknesses of the regulatory and monetary policy responses to that crisis.

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Notes

  1. 1.

    From a lecture by brother William on the life of their father: ‘I must explain that the Lehman family, for many years past has had no connection with the management or ownership of Lehman Brothers. I disclaim any personal responsibility for the financial crisis. Of course, had the family remained in charge my brother Charles would have been running Lehman Brothers and there would have been no crisis’ (W. Goodhart 2010: 2).

  2. 2.

    The foregoing paragraph draws in part from Chrystal and Mizen (2003).

  3. 3.

    Teaching at a university was a natural place for Goodhart to land after the Bank. While still at the Bank he had written Money, Information and Uncertainty (Goodhart 1989), which had become a standard text for teaching intermediate level money and banking courses.

  4. 4.

    Since the end of 2010, regulators in the EU, USA and other places have issued remuneration guidelines that generally include requirements that pay structures reflect safe and sound banking and appropriate risk-taking incentives and provide for clawback of bonuses over time if decisions later result in losses.

  5. 5.

    The following discussion of creditor bail-in resolution draws on Avgouleas and Goodhart (2015).

  6. 6.

    In ‘The Changing Role of Central Banks’, Goodhart points out that the essence of central banks is ‘banking’, i.e. the use of their balance sheets to add and absorb liquidity (Goodhart 2011c). This they do with lender of last resort and open market operations. Central banks were institutions of financial stability long before they were monetary policy makers and, with the payment of interest on deposits at the central bank, liquidity and monetary policy interest rate setting can in theory be separated, though it would not be a good idea to do so.

References

Main Works by Charles Goodhart

  • Avgouleas, E. and C.A.E. Goodhart (2015). ‘Critical Reflections on Bank Bail-Ins’. Journal of Financial Regulation, 1(1): 3–29.

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  • Brunnermeier M., A.D. Crockett, C.A.E. Goodhart, A.D. Persaud and H.S. Shin (2009). The Fundamental Principles of Financial Regulation. Geneva Reports on the World Economy 11. Geneva: International Center for Monetary and Banking Studies (ICMB) and London: Centre for Economic Policy Research (CEPR).

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  • Goodhart, C.A.E. (1962). ‘National Banking System Reactions to Seasonal Variations, 1900–1913’. Two volumes. PhD thesis, Harvard University.

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  • Goodhart, C.A.E. (1972). The Business of Banking, 1891–1914. London: Weidenfeld & Nicolson.

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  • Goodhart, C.A.E. (1984). ‘Problems of Monetary Management: The UK Experience’. Chapter III in C.A.E. Goodhart Monetary Theory and Practice. London: Macmillan: 91–121.

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  • Goodhart, C.A.E. (1987). ‘The Foreign Exchange Market: A Random Walk with a Dragging Anchor’. FMG Discussion Paper 1. London: FMG.

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  • Goodhart, C.A.E. (1988). The Evolution of Central Banks. Cambridge, MA: MIT Press.

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  • Goodhart, C.A.E. (1989). Money, Information and Uncertainty. Second edition. Houndmills, Basingstoke, Hampshire: Macmillan.

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  • Goodhart, C.A.E. (1997). ‘Whither Now?’. BNL Quarterly Review, 50(203): 385–430.

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  • Goodhart, C.A.E. (1998). ‘The Two Concepts of Money: Implications for the Analysis of Optimal Currency Areas’. European Journal of Political Economy, 14(3): 407–432.

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  • Goodhart, C.A.E. (2004). ‘Some New Directions for Financial Stability?’. Per Jacobsson Lecture. Available at: http://www.bis.org/events/agm2004/sp040627.pdf.

  • Goodhart, C.A.E. (2010). ‘How Should we Regulate Bank Capital and Financial Products? What Role for “Living Wills”?’. Chapter 5 in The Future of Finance and the Theory that Underpins It. London: LSE: 165–186.

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  • Goodhart, C.A.E. (2011a). ‘The Squam Lake Report: Commentary’. Journal of Economic Literature, 49(1): 114–119.

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  • Goodhart, C.A.E. (2011b). ‘The Emerging New Architecture of Financial Regulation’. Chapter 1 in Monetary Policy and Financial Stability in the Post-crisis Era. South African Reserve Bank Conference Series 2010, South African Reserve Bank 90th Anniversary. Pretoria: South African Reserve Bank: 1–54.

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  • Goodhart, C.A.E. (2011c). ‘The Changing Role of Central Banks’. Financial History Review, 18(2): 135–154.

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  • Goodhart, C.A.E. (2013). ‘Narratives of the Great Financial Crisis (GFC): Why I Am Out of Step’. Journal of Financial Perspectives, 1(3): 13–19.

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  • Goodhart, C.A.E. (2015). ‘Why Monetary Policy Has Been Comparatively Ineffective?’. The Manchester School, 83(S1): 20–29.

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  • Goodhart, C.A.E. and J.P. Ashworth (2012). ‘QE: A Successful Start May Be Running into Diminishing Returns’. Oxford Review of Economic Policy, 28(4): 640–670.

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  • Goodhart, C.A.E. and A.D. Crockett (1970). ‘The Importance of Money’. Bank of England Quarterly Bulletin, 10(2): 159–198. Reprinted as Chapter I in C.A.E. Goodhart (1984) Monetary Theory and Practice. London: Macmillan: 21–66.

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  • Goodhart, C.A.E. and M.A. Jensen (2015). ‘A Commentary on Patrizio Laina’s “Proposals for Full-Reserve Banking: A Historical Survey from David Ricardo to Martin Wolf”’. Economic Thought, 4(2): 20–31.

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  • Goodhart, C.A.E., P. Sunirand and D. Tsomocos (2004). ‘A Model to Analyse Financial Fragility: Applications’. Journal of Financial Stability, 1(1): 1–30. Reprinted as Chapter 6 in J. Toporowski (ed.) (2010) Financial Markets and Financial Fragility. Northampton, Mass.: Edward Elgar: 138–167.

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  • Goodhart, C.A.E., P. Sunirand and D. Tsomocos (2011). ‘The Optimal Monetary Instrument for Prudential Purposes’. Journal of Financial Stability, 7(2): 70–77.

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  • Goodhart, C.A.E. and D. Tsomocos (2012). The Challenge of Financial Stability: A New Model and Its Applications. Cheltenham, UK: Edward Elgar.

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  • Goodhart, C.A.E., D. Tsomocos and M. Shubik (2013). ‘Macro-Modelling, Default and Money’. FMG Special Paper 224. London: FMG.

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  • Goodhart, C.A.E., D. Tsomocos and A.P. Vardoulakis (2010). ‘Modeling a Housing and Mortgage Crisis’. In R.A. Alfaro (ed.) Financial Stability, Monetary Policy, and Central Banking. Santiago, Chile: Central Bank of Chile: 215–253.

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  • Kashyap, A.K., R. Berner and C.A.E. Goodhart (2011). ‘The Macroprudential Toolkit’. IMF Economic Review, 59(2): 145–161.

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Other Works Referred To

  • Chrystal, K.A. and P.D. Mizen (2003). ‘Goodhart’s Law: Its Origins, Meaning and Implications for Monetary Policy’. Chapter 8 in P. Mizen (ed.) Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart. Volume 1. Cheltenham, UK: Edward Elgar: 221–243.

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  • Goodhart, W. (2010). ‘A.L. Goodhart’. LSE Legal Studies Working Paper No. 1/2010. London: LSE.

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  • Lucas, R.E., Jr. (1976). ‘Econometric Policy Evaluation: A Critique’. In K. Brunner and A.H. Meltzer (eds) The Phillips Curve and Labor Markets. Carnegie-Rochester Conference Series on Public Policy. Amsterdam: North-Holland Publishing Company: 19–46.

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Authors and Affiliations

  1. Economic Studies programme at the Brookings Institution, Washington, D.C., USA

    Donald Kohn

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Correspondence to Donald Kohn .

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  1. Researcher in Economics, London, UK

    Robert A. Cord

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Kohn, D. (2019). Charles Goodhart (1936–). In: Cord, R.A. (eds) The Palgrave Companion to LSE Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-58274-4_31

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  • DOI: https://doi.org/10.1057/978-1-137-58274-4_31

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