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13 - Horses for Courses

The Drive for Independence

Published online by Cambridge University Press:  18 September 2020

Harold James
Affiliation:
Princeton University, New Jersey
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Summary

After September 1992, the Bank was at the forefront of the search for a new policy framework. It pushed the idea of central bank independence, that was heavily supported by academic theory, as well as by the framework established in 1991 at the Treaty of Maastricht. The reform was driven by the new Governor, Eddie George, but also by Chief Economist Mervyn King. The Bank also defined its mission in terms of three core purposes, monetary stability, financial stability, but also the promotion of the efficiency and effectiveness of the UK financial services sector; and reformed its administrative organization – a move that was highly unpopular with its staff. The key to the new policy was an inflation target, established by the government, and implemented through regular meetings of the Chancellor of the Exchequer (at that time Kenneth Clarke) and the Governor of the Bank. These attracted considerable publicity, and were known as the Ken and Eddie show: it was often thought to be an exercise in which a hawkish Governor pressed for interest rate rises, which a doveish and politically sensitive Chancellor resisted.

Type
Chapter
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Making a Modern Central Bank
The Bank of England 1979–2003
, pp. 318 - 375
Publisher: Cambridge University Press
Print publication year: 2020

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  • Horses for Courses
  • Harold James, Princeton University, New Jersey
  • Book: Making a Modern Central Bank
  • Online publication: 18 September 2020
  • Chapter DOI: https://doi.org/10.1017/9781108875189.013
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  • Horses for Courses
  • Harold James, Princeton University, New Jersey
  • Book: Making a Modern Central Bank
  • Online publication: 18 September 2020
  • Chapter DOI: https://doi.org/10.1017/9781108875189.013
Available formats
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Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Horses for Courses
  • Harold James, Princeton University, New Jersey
  • Book: Making a Modern Central Bank
  • Online publication: 18 September 2020
  • Chapter DOI: https://doi.org/10.1017/9781108875189.013
Available formats
×