Central Bank Modernization
Neil Courtis and Peter Nicholl, (editors), Central Banking Publications, 2005
articles & speeches
Do all central banks need a well developed brain?
The focus in this paper will be mostly on central banks in less developed economies and some emerging economies, especially transition ones. There is no need for elaboration of the importance of research in advanced economies’ central banks or monetary authorities. It is true that a lot of emerging market economies have well developed “brains”. However, some may need to pay more attention to its active use.
The aim of this paper is twofold. First, it will examine whether all central banks really need a well developed brain. Second, it will give some general guidelines on how central banks should proceed if they intend to develop and maintain a healthy brain.
The focus in this paper will be mostly on central banks in less developed economies and some emerging economies, especially transition ones. There is no need for elaboration of the importance of research in advanced economies’ central banks or monetary authorities. It is true that a lot of emerging market economies have well developed “brains”. However, some may need to pay more attention to its active use.
This paper is primarily the result of the author’s own experience attained while working in or visiting central banks of Central and Eastern Europe and Middle East. But, conclusions could be applied to a broader population of central banks, mutatis mutandis.
In this paper the word «research» is not used in its narrow meaning. So, research is nod defined as: “ … the set of activities leading to economic analysis which strives to be up to academic standards, i.e. up to the standard of leading-edge scientific journal.” (Goodfriend at al, 2004, p. 2). The word research is used in a much more broader context encompassing analytical macro and microeconomic work (at central banks of course), synthetic conclusions, overall assessments of the economic situation – in short, active “use” of modern economic thinking on real world problems. It is not about new scientific discoveries in economics only (for which most of the countries referred to have no capacity and probably should not invest to have one soon), but about the application of modern economic ideas and techniques in solving problems faced by central banks in a specific country.
