Developments in central banking after the GFC: Central banks, the state, globalisation and the GFC

There is general consensus that central banks are entering a new chapter in their history after the global financial crisis (GFC), and that they are in fact on the brink of a new era in central banking (see for example Goodhart, 2010, p. 15). The GFC highlighted the need for a broader responsibility for and oversight of financial stability, not only in domestic economies, but in the world as a whole (G-20, 2010). This responsibility may become the primary responsibility of central banks, as they may be the best institutions to oversee financial stability generally, or at least play an important or lead role in financial stability. The predominant focus of central banks currently is monetary policy. A change in the mandate of central banks to include or prioritise a responsibility for financial stability will result in a number of changes in central banking. In fact, central banking may never be the same again (Mishkin, 2010, p. 50). A changed responsibility may also affect the relationship between the central bank and the state (Goodhart, 2010, p. 15). This chapter focuses on how, after the GFC, the relationship between the central bank and the state may change, and how a greater responsibility for financial stability on the part of central banks may impact on central bank independence and the relationship between the central bank and the state.