Final remarks

Final remarks
Svein Gjedrem 1
Dear colleagues and guests,
The question raised today was “What is a useful central bank?” A central bank
is different from other public bodies in that it has its own balance sheet, independent budgetary authority and its own accounts. To build confidence in the
bank over time, it must manage this form of autonomy in a sound manner.
In the morning session, Michael Bordo and Gianni Toniolo discussed historical perspectives on central banking. Central banks were put to a severe test in
the interwar period. Central bankers sought the solution to the turbulent times
by looking back at the stability of the gold standard. But the policy came with
a cost. Central banks were held responsible for the deep recessions in the
1920s and early 30s.
The pendulum swung toward less independence for central banks, what Michael Bordo referred to as the dark age. The 60s and the 70s were probably an
all-time low for central banks, including Norway.
The objectives pursued by the central bank are for the common good. However, we must manage our mandates well, a lesson drawn by both Bordo and
Toniolo.
Today’s monetary policy frameworks, either explicit inflation targeting or
other formulations of the objective, are partly a reflection of the experience
from the dark ages. Central banks had to be given a greater role in promoting
a well functioning economy. So, we have already learned from our economic
history, even without inflating our staff with economic historians, as Toniolo
suggested.
1
Concluding remarks by Governor Svein Gjedrem, Norges Bank, at Norges Bank’s symposium “What is a useful central bank?”, 18 November 2010.
GJEDREM: FINAL REMARKS
203
Central Bank independence is again at stake in the aftermath of the most recent crisis. Governor Zeti Akhtar Aziz discussed the challenge of preserving
independence while co-operating with the government in resolving financial
crises. She also called for co-operation across countries and said that standalone arrangements may not lead to the desired outcomes. Phil Turner warranted an assessment of the interplay between QE and the issuance of government debt. (In the case of Norway, this topic is not imminent.)
Stefan Ingves reminded us that increased openness generally has proven useful.
So – what is a useful central bank? One conclusion might be that the question
itself should be raised over and over again. It should be a permanent guideline
for central bankers.
It is now time to close the symposium. The discussion today has offered a
wide range of issues for discussion. I have enjoyed all the contributions – and I
want to thank all presenters, discussants, keynote speakers and panellists for
your efforts. For those of you who are not staying, I wish you a safe and pleasant journey home.
Thank you.
204
NORGES BANK OCCASIONAL PAPERS NO. 42