What Bird is That? Central Banking and Monetary Policy in the Last Forty Years

56 Pages Posted: 14 Jan 2020 Last revised: 5 Mar 2020

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Date Written: January 1, 2020


The aim of this paper is to review the historical development of monetary policy theory since the 1980s using as focal point the nexus among central bank governance, central banker preferences and monetary policy effectiveness. Assuming a positive perspective the review highlights three subsequent but overlapping stages: modern economics, advanced political economy and behavioural economics. First, the central bank emerged as an independent institution. Second, conservative central bankers were viewed as bureaucrats who used committees to make monetary policy decisions, where the differentiation between hawks and doves gained momentum. Third, more recent research focused on the fact that psychology can matter for explaining how central bankers reach their decisions. The traditional distinction has been enriched with pigeons and swingers.

Keywords: Monetary Policy, Central Banking, Political Economics, Behavioral Economics, Central Bank Independence, Conservatism, Monetary Policy Committee, Hawks and Doves

JEL Classification: E03, E52, E58

Suggested Citation

Masciandaro, Donato, What Bird is That? Central Banking and Monetary Policy in the Last Forty Years (January 1, 2020). BAFFI CAREFIN Centre Research Paper No. 2020-127, Available at SSRN: https://ssrn.com/abstract=3518369 or http://dx.doi.org/10.2139/ssrn.3518369

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136

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