Necessity as the mother of invention monetary policy after the crisis

a range of other (mainly European) countries. It is worth emphasizing that while the
academic sample is dominated by respondents from the U.S., the euro area, and the U.K.,
the central bank sample is not. For this reason, we sometimes report tabulations that try to
“match” the geographies better. We also tracked the backgrounds of our responding
academics. Most have been trained in the United States: 84% hold a U.S. PhD. Around a
quarter have previously worked in a central bank. In contrast to the central bank governors,
most academic respondents (82%) are residents and citizens in countries that were hit by
the financial crisis.
Two methodological points about surveying in general, and surveying central bank
governors in particular, bear emphasis—as we know from questions we have received
from readers and seminar participants. The first is that survey instruments must be brief
and the questions easy for respondents to answer else the response rate will be extremely
low. Our academics’ questionnaire could be completed easily in five minutes, maybe in
three, and yet the response rate didn’t reach 40%. Second, you cannot ask central bank
heads sensitive questions, even if you guarantee confidentiality (which we did). They are
a tight-lipped group that knows how to keep secrets. So we restricted ourselves to
questions that, we imagined, central bankers would probably be willing to answer in
public. 5
With that in mind, here are our key findings: Necessity has indeed been the trigger for
many central bank inventions—central banks in crisis countries are much more likely to
have resorted to new policies, to have had discussions about their mandates, to have
communicated more and to have received criticism. But the thinking has changed more
broadly—for instance, central banks in non-crisis countries are also likely to have
reconsidered their mandate or to have implemented macro-prudential measures. Based on
the surveys, we hypothesize that central banks in the future will have broader mandates,
use macro-prudential tools more widely, and communicate more than before the crisis.
Even though there is not yet an agreement about the future use of unconventional monetary
policy tools, we think that most of them will remain in central banks’ toolkits, in particular
because central bank governors who gained experience with a particular tool are
considerably more likely to assess that tool positively. Finally, the relationship between
the central banks and their governments might well have changed, with central banks
“crossing the line” more routinely in the future. But this is conjecture; only the future will
tell.
Having said that, it is important to recognize that the world of central banking—which
stretches far beyond the Federal Reserve, the European Central Bank (ECB), the Bank of
England, and the Bank of Japan—did not change nearly as much as many academic
discussions (which concentrate on these four) might lead you to believe. In particular, in
many countries, unconventional monetary policies were not considered, and central banks
have not been under extensive scrutiny and criticism. On the other hand, those four central
banks cover almost half of the world’s GDP (World Bank, 2015), making them especially
interesting “special cases.”
5
We think we succeeded. We didn’t get many blanks.
3