The Development of Monetary Policy in the 20th Century – Some Reflections

National Bank of Belgium Working Paper No. 186

32 Pages Posted: 23 Sep 2010 Last revised: 27 Sep 2010

See all articles by Otmar Issing

Otmar Issing

Center for Financial Studies (CFS)

Date Written: April 1, 2010


In this paper I outline – from a practitioner’s as well as from a researcher’s perspective – several of the key developments that took place during the last century in monetary policy. In particular, I describe how the monetary system evolved from gold standard, prevailing throughout most of the last century, to paper money and how the norm in central banking changed from pure discretion after World War II to transparency and independence. I furthermore analyze how the exchange rate regime under Bretton-Woods impacted on countries’ monetary policy and, with a focus on Europe, how European Monetary Union (EMU) emerged from the European Monetary System (EMS). I then outline today’s relatively broad consensus on monetary policy and how it developed from a learning process on the side of central banks and important contributions from research. Finally, after arguing that the ECB’s monetary policy which fruitfully combines past experience and current research is a successful and promising approach, I outline some challenges lying ahead.

Keywords: monetary policy, monetary system, European Monetary Union, ECB

JEL Classification: A11, B22, E42, E58, F33, N1

Suggested Citation

Issing, Otmar, The Development of Monetary Policy in the 20th Century – Some Reflections (April 1, 2010). National Bank of Belgium Working Paper No. 186, Available at SSRN:

Otmar Issing (Contact Author)

Center for Financial Studies (CFS) ( email )

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