Strengthening the Central Bank

Abstract

The development of monetary policy through the 1960s, 1970s and 1980s is often portrayed as a story of movement from regulation to deregulation, or from a state-centred system to a market-centred system. This is the basic story, for example, which Schedvin (1992) sees underlying his intricately detailed history (though it leaves off in 1975):

Running through the story of monetary management was a gradual swing of the pendulum of central banking philosophy towards liberalisation and to reliance on markets as the fulcrum of action. As the memory of depression and war faded, suspicion of the markets receded. The change was imperceptible at first, became more pronounced in the 1960s, and gathered momentum with global financial integration following the breakdown of Bretton Woods and the revolution in electronic communication. Towards the end of the period covered in this book, the myth of market invincibility emerged that helped to dismantle the remaining tangle of regulation and create a largely free environment for financial institutions. (Schedvin, 1992, p. 544)