The Ideology of Central Banking in the Interwar Years and Beyond

Harold James

doi:10.1017/9781009367578.004

2 - The Ideology of Central Banking in the Interwar Years and Beyond

from Part I - General

Published online by Cambridge University Press: 02 November 2023

Harold James

Edited by

Barry Eichengreen and

Andreas Kakridis

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Barry Eichengreen: Affiliation:
University of California, Berkeley
Andreas Kakridis: Affiliation:
Bank of Greece and Panteion University, Athens

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Summary

This chapter asks how a new generation of central banks in the interwar period changed their function, away from state financing and financial stability provision, and toward stabilizing prices and avoiding fiscal and financial dominance. The new concept of a central bank as an institutional constraint, imposed from the outside, and movement from a “can do” to a “can’t do” institution, ultimately ended in failure. It made for bad policy and poor outcomes, specifically contributing failure to stem contagion in the 1931 financial crisis. After 1945 a new reinvention of central banking involved the elaboration of a social consensus that bought back ele-ments of the “can do” environment.

Keywords

central banks financial stability gold standard fiscal dominance financial dominance inflation hyperinflation

Type: Chapter
Information: The Spread of the Modern Central Bank and Global Cooperation
1919–1939
, pp. 40 - 56

DOI: https://doi.org/10.1017/9781009367578.004 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2023

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