Genesis
Central banks have been around quite a while. They began as a useful institution that mostly benefited banks, and were not universally seen as something that particularly benefited society. Central banking was long associated with grey men in grey suits, pondering deeply the impenetrable machinations of high finance, fuelled by cigar smoke and mystique. In truth, this – at best – Capraesque view of central bankers is substantially out of date, and has been for decades. They are no longer monochrome, or exclusively male, and need skills their forebears could have barely imagined – and they have most decidedly different priorities.
Like all institutions, central banks are the people who work in them. And as with many occupations with a public service element, the substantial expertise embodied in those people for the very particular – and evolving – challenges of central banking could usefully be shared. Global challenges often need global solutions, and local challenges are faced everywhere and someone, somewhere has probably faced the same one as you. Recognising this led to a striking initiative taken by the Bank of England in the early 1990s. It was decided that the Bank should create a forum where the central bankers of the world could gather to commune, discuss, and above all, learn together.
The timing, of course, was not incidental and the initiative turned out to be a prescient one. This was at a major historical turning point, one that signalled a burgeoning new world order, as the Iron Curtain crumbled, the European experiment gathered momentum, and industrial might continued an inexorable shift eastwards. Economic policy had shifted too. Monetary policy was beginning a new and – as it turned out – lasting phase. There was indeed much to learn, and new monetary policy needed new approaches better suited to those policies. (Post-Great Financial Crisis, the necessary tool kit would change again.)
And so the Centre for Central Banking Studies was founded. Hammond (2006) provides a history of the early years of the CCBS, charting an ambitious project that had an immediate impact on international central banking practices. More than thirty years later it remains a key forum for learning, discussion and networking, just as intended. Literally thousands of central bankers have taken part in CCBS events, and many alumni now occupy senior policymaking positions around the world. Activities have evolved to include many more of the disparate areas of responsibility that now involve the central banking community, and with a truly global reach.
This book is about a small part of that output. It is (mostly) about applied economics and central banking. It is born of the experience of the many who have participated in events over the years, with literally thousands of suggestions that have improved and expanded the content delivered to properly reflect the daily concerns of the central bank economist.
Mostly, but not entirely. Mostly, because the tool kit continues to expand and the techniques of data analysis evolve. We are all data scientists of some sort now, with a domain specialisation of central banking. And that domain is somewhat different to economists in academia or industry, with more of a focus on what we might dub causal forecasting. Underlying much of central bank analysis are a number of useful statistical methods and machine learning models that complement the default econometric approach. Taken together these constitute a language that central bankers need to understand. Some of this book is about how to build, interpret, and use models that used to be anathema to the econometrician but are increasingly part of the predictive landscape.
Placeholders abound.
The Bank of England does not accept any liability for misleading or inaccurate information or omissions in the information provided. The subject matter reflects the views of the author and not the wider Bank of England or its Policy Committees.