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This chapter describes the coordination and evolution of the transnational central banking community's training and technical assistance programs and explores the transformation campaign's overall effects in postcommunist states. While the transnational central banking community encouraged postcommunist governments to adopt legislation granting independence to their central banks, it came into its own with the campaign to transform the beliefs and practices of postcommunist central bankers. Driven by a desire to preserve international financial stability and to draw new members into the community, established central bankers individually and collectively deployed their extensive organizational, human, and material resources to develop training and technical assistance programs for the postcommunist central banks. Postcommunist central bankers welcomed this assistance because of the community's international status and model, the challenge of managing the complex postcommunist economic environment, and the social and material incentives for joining the community.

This chapter explains why and how central bankers in the advanced industrial democracies formed a cohesive community advocating price stability and political independence in the 1990s. This community shared two key operational principles. Most fundamentally, central bankers came to agree that a central bank's primary task should be to maintain a low and stable inflation rate, which they referred to as price stability. Moreover, because policies aimed at achieving price stability could be politically contentious, central bankers further agreed that they needed significant independence from their governments in order to do their jobs properly. Ultimately, central bankers agreed that if independent central banks successfully pursued price stability, growth and employment would follow.

This chapter studies the professional, political, and academic ‘human capital endowment’ of the central bank governors in office between 1950 and 2000 in twelve OECD countries. Although many national differences are observed, four more general shifts in central bank governor ‘types’ have been identified: (1) the civil servant central banker of the economic ‘golden age’ of the 1950s and 1960s; (2), the central bank politicians of the 1970s; (3) the market-oriented governors of the 1980s; and (4), the academic central banker from the 1990s onward. During the period studied, it is also possible to track the development of an international elite of central bankers, sharing similar backgrounds (academically and professionally) and views on monetary policy. A key observation is that ‘what makes for a credible central banker’ has changed over time, and especially following events such as economic recessions or financial crises.

This chapter assesses central bankers' attitudes toward inflation and deflation. Specifically, it presents a statistical test to demonstrate whether, and to what extent, the ideas held by the central bankers at the Bank of Japan (BOJ) influenced Japan's monetary policy. The results show a systematic effect of central bankers' ideas on how they determine what should be Japan's monetary base, while controlling for the status of the economy and the political environment. Concerns about inflation are a better predictor of policy than objective economic indicators. The results also reveal an Abe effect, a systematic impact of the policy ideas championed by Prime Minister Abe Shinzō after he came to power in 2012. Meanwhile, there is little evidence that the political business cycle or political partisanship influenced the BOJ policy choices.

This chapter examines the unresolved debate among central bankers and researchers about the value of the direct signaling of policy intentions. The chapter is organized as follows. Section 6.2 describes the real-world direct signaling of policy inclinations by central banks and outlines some of the arguments for and against such transparency. Sections 6.3 and 6.4 examine the macroeconomic effects of direct revelation of a central bank's expectations about the future path of the policy rate in a small theoretical model, in which private agents have imperfect information about the determination of monetary policy. In particular, it focuses on the desirability of central bank transparency about the expected path of policy when the public is uncertain about the central bank's preferences and, therefore, the future path of policy. It is shown that publication of interest rate projections better aligns the expectations of the public and the central bank. Under reasonable conditions, improving the alignment of expectations helps the central bank better meet its goals, providing support for full central bank transparency.

This chapter discusses the international surge of Japanese credit creation during the war, when Japan emerged, briefly and “prematurely,” as one of the world's top three creditor countries. Tokyo financial groups lent to Britain and France, as well as to Russia and China. Simultaneously, Japanese central bankers began to build the institutional infrastructure of an international credit center. This initiative was relatively unsuccessful. It did, however, herald the beginning of a structural shift. The chapter also looks at two parastatal banks—the Yokohama Specie Bank and the Industrial Bank of Japan—which functioned as a designated foreign exchange bank and a long-term industrial-investment bank, and their key roles in the administration of Japan's capital imports and exports. They were established to realize national policy goals, to mobilize domestic funds, and to build Japan's standing in international finance.