Necessity as the mother of invention monetary policy after the crisis

as apply).” (See Figure 2.) Here we found—again, perhaps surprisingly—a bit more
interest in changing the mandate within than outside the central bank. (Aren’t central
bankers stodgy about change?)
Answers from academics were broadly similar to a question that asked, “Did the world
financial crisis of 2007-2009 and/or its aftermath lead you to think that it would be
desirable to modify the mandate of your country’s central bank in any way? (please check
one)” and “If “Yes,” would these modifications apply to: (please check as many as
apply).” Notice that the question here is about desirability—a somewhat sterner test than
just having discussions. The academics were a bit less enamored of changing their central
banks’ mandate (54%); see Table A1 in the Appendix for details. 6
Figure 2. Discussions about the central bank mandate inside the central bank
Notes: The left-hand chart shows whether, according to central bank governors, a discussion took
place inside the central bank about changing the mandate. The right-hand side chart shows the
changes that were discussed (in % of the respondents who answered “Yes”). The explanations
provided in the survey indicate that when governors answer “other”, they mostly refer to
discussions on adding financial stability. Source: Authors’ calculations based on a survey
conducted in 2016.
To dig a bit deeper, we tried to explain the answers of the governors (where we have
substantial cross-country variation) based on country and central bank characteristics, and
those of the academics (where we only have little cross-country variation) based on
individual characteristics. We created dummy variables equal to one if there has been a
discussion inside/outside the central bank about its mandate, and if the academic finds it
desirable to modify the mandate, and modeled each as a probit.
For the governors’ answers, we considered the following explanatory variables:
A dummy indicating advanced economies, according to the IMF classification;
Trade openness, measured as the ratio of exports and imports to GDP (Source: World
Bank);
6
We used the possibly-ambiguous wording “your country” without telling the academics whether that meant their country of
residence or their country of origin. But the questionnaire did instruct them, “If your country of residence is in the euro area,
please interpret this phrase as referring to the European Central Bank.” So we imagine most used their country of residence.
6