Central Banking and Macroeconomic Ideas: Economics, Politics and History

Abstract

The lecture notes describe different views in analysing the relationships between the central banking activities – i.e. monetary and banking policies – and the business cycle, using a modified workhorse AS AD model, in order to include in the simplest way uncertainty, expectations and the role of banking and finance, as well as the incentives of the policymakers. The bottom line is to show pedagogically that one size - i.e. a unique economic mainstream – doesn’t fit all – i.e. cannot explain different national and historical business cycles. Therefore it is necessary to know more than one macroeconomic views, and history, politics and empirics matters in disentangling the pros and cons of each of them.