Bordo Comment on Marc Flandreau

Comment on Marc Flandreau , “ Pillars of Globalization: A History of Monetary Policy Targets, 1797-1997 “Michael BordoKings College CambridgeRutgers University and NBERPrepared for the Fourth ECB Monetary Policy conference, Frankfurt November 9-10 2006.‰‰‰‰IntroductionMarc Flandreau compares monetary targeting under gold standard convertibility 100 years ago with that under inflation targeting todayThe evolution between the two targets is based on changing institutions (especially their incentives) and the constraints facing central banks , and changes in information technologyMany similarities between regimes: rules vs discretion, CB independence, the choice of nominal anchor. Key differences: today’s CB not private profit maximizing entities and we no longer adhere to gold convertibility rules2‰‰‰‰IntroductionFlandreau’s main thesis is that CBs role, as private monopoly banks of issue with public responsibilities, was the object of public concern over their governanceThis explains the advent of the gold convertibility rule, the advent of LLR and CB independence in the nineteenth century Gold convertibility targets backfired in the interwar leading toGolden Fetters because gold convertibility was divorced from private incentives– Monetary management was a product of the Keynesian/Monetarist debate– This was followed by the work on time inconsistencyThe development of good price indexes and advances in monetary theory made the ...