Over
the last five decades, there has been a consider able
amount of development in the area of monetary and
macroeconomic policies. During this period, four monetary
policy regimes have succeeded each other and a specific
form of governance was represented by each of them.
The term governance here is regarded as the decision-making
processes of the central bank. It helps to organize
the relationship among central bank, government and/or
elected councils. Such governance takes into account
various traditions, institutional design, authorization,
responsibility, communication strategies that go on
to determine various rules.
These rules, further,
decide how power can be exercised, how people can
attain their voice and, above all, how decisions can
be made on the issues related to the public. In all,
good governance gives rise to macroeconomic stability
and orderly and stable regulatory economic growth,
which are the keystones of monetary policy. Hence,
the central bank must possess the monetary policy
right, which is its core task too. Now,
before discussing the new governance that is developed
by comparing Federal Reserve System (Fed), the central
banking system of the US, and the European Central
Bank (ECB), a brief analysis of governance during
successive monetary regimes will help us to understand
its development.
The first among them is Keynesian
regime that is often associated with the rationalization
of active governance of macroeconomic policies. The
regime initiated by John Keynes through his book titled,
The General Theory of Employment Money and Theory
(1936), has almost changed the way the world viewed
economy and the role of the government in the society.
The regime was basically applied throughout the capitalist
world. It was the government that controlled everything,
including the central bank which issued monetary policies.
During this regime, monetary policy was seen as the
sole element for the global policy. Overall, in Keynesian
monetary policy there is only government and no governance. |
