Chief Economists' Workshop: Policy Challenges to Monetary Theory -
16 to 18 April 2007
Introduction | Programme
Welcome from the Director of the CCBS
It is my pleasure to welcome you warmly to the Bank of England and to this fourth annual Chief Economists' Workshop. As in previous occasions, this event is organized by the Centre for Central Banking Studies and is aimed at the top echelon of central bank officials dealing with the practical and analytical aspects of monetary and financial policies. For us, at the CCBS, this is one of the central activities within our comprehensive program of seminars, workshops and expert fora that we deliver here in London and all over the world. As such, we attempt to focus on issues that are both challenging and of relevance for a wide cross-section of central banks. In the past we discussed the interplay between monetary policy and financial stability, the choice of exchange rate regime, and modelling and forecasting issues.
This year we decided to move back from immediate day-to-day issues and consider the challenges raised for current monetary policy by the existing monetary theory paradigms. We know that these paradigms evolve over time. In the immediate post-war period, the "Phillips Curve" paradigm was highly predominant. Policy makers believed it was possible to accept higher inflation as the price of permanently higher levels of output and employment. But in the 1970s, that paradigm was shattered by actual experience. In response, monetary theory reacted vigorously and a new conceptual framework was established to underpin the new prevalent framework for monetary policy.
But new theoretical frameworks do not necessarily provide a uniform guide to deal with the wide variety of questions confronted, in practice, by central banks. Unexpected events have forced central bankers to respond with new and imaginative steps and a great deal of learning by doing has taken place. This, in turn, has given significant incentives to monetary theorists to enhance their effort to understand better the way our economies really work. And their role is indeed very important. That is so because, as have been said by our Governor, Mervyn King, "central bankers need to understand not just what happens in their economies but also why it happens and that is the challenge for monetary theory."
Our workshop is one more attempt to examine that challenge. It has assembled papers by leading academics that scrutinize various aspects of current monetary policy questions and examine how they shape new theoretical developments. These papers are combined with 12 presentations from workshop participants, who represent the practitioners that face the challenge in their day to day work. The papers span over a wide range of actual issues in their respective environments, and relate them to the analytics of the question raised.
We do hope that this blend of academic and policy-related papers will make this workshop relevant and useful but also productive and enjoyable.
Mario I. Blejer
Director of CCBS
