- Copyright Page
- Central Banking’s Long March over the Decades
- Monetary Policy Committees and Voting Behavior
- Peaks and Troughs: Economics and Political Economy of Central Bank Independence Cycles
- The Governance of Central Banks: With Some Examples and Some Implications for All
- Can the Central Bank Alleviate Fiscal Burdens?
- The Impact of the Global Financial Crisis on Central Banking
- Strategies for Conducting Monetary Policy: A Critical Appraisal
- Central Bank Communication: How to Manage Expectations?
- Central Bank Communications: A Case Study
- Transparency of Monetary Policy in the Postcrisis World: Nergiz Dincer, Barry Eichengreen, and Petra Geraats
- Real Estate, Construction, Money, Credit, and Finance
- Inside the Bank Box: Evidence on Interest-Rate Pass-Through and Monetary Policy Transmission
- Term Premium Variability and Monetary Policy
- Open Market Operations
- Central Banking and Prudential Regulation: How the Wheel Turns
- Central Banks’ New Macroprudential Consensus
- Central Banks and the New Regulatory Regime for Banks
- Macroprudential Regulation of Banks and Financial Institutions
- Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory
- The Changing Role of the Central Bank in Crisis Avoidance and Management
- Managing Macrofinancial Crises: The Role of the Central Bank
- Macromodeling, Default, and Money
- Model Uncertainty in Macroeconomics: On the Implications of Financial Frictions
- What Has Publishing Inflation Forecasts Accomplished? Central Banks and Their Competitors
Abstract and Keywords
Mainstream macromodels have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money, and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms become a modeled part of the process, or a “playable game.” Financial systems are not static, nor are they necessarily reverting to an unchanging equilibrium, but they are evolving processes, subject to institutional control mechanisms, which themselves are subject to sociopolitical development. Process-oriented models of strategic market games can be translated into consistent stochastic models incorporating default and boundary constraints.
Charles Goodhart is former Director of the Financial Regulation Research Programme at the London School of Economics.
Nikolaos Romanidis is a doctoral candidate at the Saïd Business School at Oxford University.
Dimitrios P. Tsomocos is Professor of Financial Economics at Saïd Business School and a Fellow in Management at St Edmund Hall, University of Oxford.
Martin Shubik was Professor Emeritus of Management and Economics at Yale University.
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