The Future of Central Bank Cooperation

50 Pages Posted: 20 Sep 2007

Date Written: February 2006

Abstract

Central bank cooperation depends on a few crucial parameters: the extent to which central bankers agree on theory (end means relationships); the extent to which they can agree on goals (social purpose); the capacity (technical and institutional) to achieve their collective goals; and whether the broader political environment facilitates or impedes cooperation. This article explores these questions by first providing an overview of central banks and bankers. Among the G-10 countries, central bankers are likely to share political independence, relatively long term horizons, and (increasingly) academic backgrounds. These conditions may be conducive to high levels of cooperation in the future. Second, I explore the easiest form of cooperation - information sharing - and conclude that this is an area in which central bank cooperation will become increasingly routinised. Cooperation to address global financial stability is a more difficult cooperative dilemma, with tensions between the need for efficient regulatory management and the inclusion of a broader range of cooperating institutions. In the area of exchange rate and monetary policy coordination, consensus among the major exchange rate authorities regarding the effectiveness of coordinated exchange market interventions has withered, though this does not preclude a new consensus from emerging in the future. One of the most significant challenges to central bank cooperation in the future will be how to include rising monetary and financial powers, particularly China, into the cooperative management of international monetary conditions.

Keywords: central bank, cooperation, monetary and financial stability, Bank for International Settlements, China

JEL Classification: E42, E50, F02, F42, G28, N20

Suggested Citation

Simmons, Beth A., The Future of Central Bank Cooperation (February 2006). BIS Working Paper No. 200, Available at SSRN: https://ssrn.com/abstract=891920 or http://dx.doi.org/10.2139/ssrn.891920

Beth A. Simmons (Contact Author)

University of Pennsylvania ( email )

3501Sansom
Philadelphia, PA 19104
United States
7817990076 (Phone)

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