The world around cen­tral banks has shifted. Euro­pe is con­fron­ting an unpre­ce­den­ted com­bi­na­ti­on of envi­ron­men­tal, eco­no­mic, and social chal­len­ges. Redu­cing car­bon emis­si­ons to zero fast enough to avoid cata­stro­phic glo­bal war­ming is dif­cult; doing so while also redu­cing eco­no­mic ine­qua­li­ty so as to avert social dis­in­te­gra­ti­on and demo­cra­tic back­sli­ding is very dif­cult. Addres­sing this twin chal­len­ge will requi­re the sta­te – and the Euro­pean Uni­on – to deploy all eco­no­mic poli­cy instru­ments alrea­dy at its dis­po­sal, and to deve­lop new ones and coör­di­na­te their use in new ways. …

The paper pro­ceeds in three steps. Sec­tion 1 dis­cus­ses three dis­tinct chal­len­ges – legal, poli­ti­cal, and ide­a­tio­nal – for the deba­te on the future of cen­tral ban­king. The rema­in­der of the paper will tack­le the two main ide­a­tio­nal chal­len­ges, name­ly, insti­tu­tio­nal amne­sia (for­get­ting the past rea­li­ties of cen­tral ban­king) and stra­te­gic igno­ran­ce (igno­ring the pre­sent rea­li­ties of cen­tral ban­king). To over­co­me insti­tu­tio­nal amne­sia, Sec­tion 2 briefy reviews the histo­ry of cen­tral ban­king, showing that pri­ce sta­bi­li­ty is only one of several goals that cen­tral ban­king has, his­to­ri­cal­ly, been asso­cia­ted with. To over­co­me stra­te­gic igno­ran­ce, Sec­tion 3 reviews three man­da­te-remo­te, or “extra­cur­ri­cu­lar” are­as of ECB acti­vi­ty, showing that the ECB does, in fact, have many more instru­ments at its dis­po­sal than just short-term (or, more recent­ly, long-term) inte­rest rates. …

Quel­le /​ Link: Cen­tral ban­king bey­ond inflation