Central Banks: A Global Perspective Chapter 14 Central Banks: A Global Perspective

The Price Stability Goal And The Nominal Anchor(名目定位) Low and stable inflation Inflation Creates uncertainty(不確定性) and difficulty in planning for the future (難以計畫未來) Lowers economic growth Strains social fabric (扭曲社會架構) Nominal anchor to contain inflation expectations(名目定位會包含通膨預期) The Time-inconsistency problem(時間不一致問題) 2

Other Goals of Monetary Policy High employment(高就業) Economic growth(經濟成長) Stability of financial markets(金融市場穩定) Interest-rate stability(利率穩定) Stability in foreign exchange market(外匯市場穩定) 3

Should Price Stability be the Primary Goal ?(價格穩定最重要嗎？ ) In the long run there is no inconsistency between the goals(長期來說這些目標並不衝突) In the short run it can conflict with the goals of high employment and interest-rate stability(短期來說高就業、 利率穩定與價格穩定相衝突) Hierarchical mandate(高層命令) Dual mandate(雙元命令) 在馬斯垂克條約中，歐洲央行的最重要任務是維繫物價穩定 4

Origins of the Federal Reserve System Resistance(抵制) to establishment of a central bank Fear of centralized power (害怕中央集權) Distrust of moneyed interests (不信任有錢人的利益) No lender of last resort(無最後貸款者) Nationwide bank panics on a regular basis Panic of 1907 so severe that the public was convinced a central bank was needed Federal Reserve Act of 1913 Elaborate system of checks and balances(精心設計的查核與平衡系統) Decentralized(分權)

Structure of the Federal Reserve System The writers of the Federal Reserve Act wanted to diffuse power along regional lines, between the private sector and the government, and among bankers, business people, and the public This initial diffusion of power has resulted in the evolution of the Federal Reserve System to include the following entities: The Federal Reserve banks, the Board of Governors of the Federal Reserve System, the Federal Open Market Committee (FOMC), the Federal Advisory Council, and around 2,900 member commercial banks.

Structure of The Federal Reserve System(聯準會架構) The writers of the Federal Reserve Act wanted to diffuse power(分散權力) along regional lines, between the private sector and the government, and among bankers, business people, and the public Federal Reserve System include the following entities The 12 Federal Reserve banks (聯邦準備銀行) The 7 Board of Governors of the Federal Reserve System (聯邦準備理事會) The Federal Open Market Committee (FOMC) (聯邦公開市場操作委員會)(7+5個委員) The Federal Advisory Council (聯邦諮詢委員會) Around 2,900 member commercial banks(會員銀行) 7

Figure 1 Federal Reserve System Source: Federal Reserve Bulletin.

Federal Reserve Banks Quasi-public institution (準公營機構) owned by private commercial banks in the district that are members of the Fed system Member banks elect six directors(6名董事) for each district; three more are appointed (任命) by the Board of Governors Three A directors are professional(專業) bankers Three B directors are prominent leaders from industry, labor, agriculture, or consumer sector Three C directors appointed by the Board of Governors(理事會)are not allowed to be officers, employees, or stockholders of banks

Federal Reserve Banks (cont’d) Member banks elect six directors for each district; three more are appointed by the Board of Governors (cont’d) Designed to reflect all constituencies of the public Nine directors appoint (任命) the president (總裁) of the bank subject to approval (通過) by Board of Governors Dodd-Frank法案(2010)排除A層的3位董事介入聯邦準備銀行總裁的選舉。

Functions of the Federal Reserve Banks Clear checks(支票清算) Issue new currency(發行通貨) Withdraw damaged currency from circulation(回收損毀的通貨) Administer and make discount loans (管理與執行貼現放款) to banks in their districts Evaluate proposed mergers and applications for banks to expand their activities(評估合併案與銀行申請擴充業務)

Functions of the Federal Reserve Banks (cont’d) Act as liaisons(聯絡人) between the business community and the Federal Reserve System Examine(檢查) bank holding companies and state-chartered member banks Collect data on local business conditions Use staffs(職員) of professional economists to research topics related to the conduct of monetary policy

The Federal Reserve System performs three traditional functions(補充) 1. Conducting monetary policy(執行貨幣政策) The Federal Reserve System’s primary function is to conduct monetary policy. Monetary policy is used to support the Fed’s primary economic goals of maximum employment, price stability and moderate long-term interest rates. 2. Supervising and regulating financial institutions(監理與規範金融機構) The Federal Reserve System is charged with helping to protect the integrity of the nation’s financial institutions. The Fed examines and regulates depository institutions in order to help ensure the safety and soundness of the financial system, to promote stability in financial markets and to promote compliance with applicable laws. By doing this, the Fed reinforces the public’s confidence in the banking system. 3. Providing payments services to financial institutions(提供金融機構之間的支付服務) The Federal Reserve System provides services to depository institutions and the federal government. Just as your bank holds cash and processes checks and electronic payments for you, the Fed holds cash reserves and processes check and electronic payments for depository institutions.

Federal Reserve Banks and Monetary Policy Directors(董事) “establish” the discount rate Decide which banks can obtain discount loans Directors select one commercial banker from each district to serve on the Federal Advisory Council (聯邦諮詢委員會)which consults with the Board of Governors and provides information to help conduct monetary policy Five of the 12 bank presidents have a vote in the Federal Open Market Committee (FOMC)

Member Banks All national banks (國家銀行) are required to be members of the Federal Reserve System Commercial banks chartered by states(州立銀行) are not required but may choose to be members Depository Institutions Deregulation(鬆綁) and Monetary Control Act of 1980 subjected(限制) all banks to the same reserve requirements as member banks and gave all banks access to Federal Reserve facilities(聯邦準備銀行設施)(註：1980之前是不平等的) 15

Board of Governors of the Federal Reserve System Seven members (7位理事) headquartered(總部) in Washington, D.C. Appointed by the president and confirmed by the Senate (總統任命，參議院副署) 14-year non-renewable term (14年任期不得連任) Required to come from different districts Chairman is chosen from the governors and serves four-year term (理事主席由7位理事中挑選任期四年) 16

Duties(職責) of the Board of Governors Votes on conduct of open market operations(投票與執行公開市場操作) Sets reserve requirements(應提準備) Controls the discount rate(貼現率) through “review and determination” process Sets margin requirements(訂定保證金比率) Sets salaries of president and officers of each Federal Reserve Bank and reviews each bank’s budget

Duties of the Board of Governors (cont’d) Approves bank mergers and applications for new activities Specifies the permissible activities of bank holding companies Supervises the activities of foreign banks operating in the U.S.

Chairman of the Board of Governors Advises the president on economic policy Testifies(聽證) in Congress Speaks(發言) for the Federal Reserve System to the media May represent the U.S. in negotiations(磋商) with foreign governments on economic matters

Federal Open Market Committee (FOMC) Meets eight times a year (每年集會8次) Consists of seven members of the Board of Governors, the president of the Federal Reserve Bank of New York and the presidents of four other Federal Reserve banks The chairman(主席) of the Board of Governors is also chair of FOMC Issues directives to the trading desk at the Federal Reserve Bank of New York (向紐約州聯邦準備銀行交易室下達指令) 20

FOMC Meeting Report(報告) by the manager of system open market operations on foreign currency and domestic open market operations and other related issues Presentation of Board’s staff(幕僚) national economic forecast Outline(概述) of different scenarios for monetary policy actions Presentation on relevant Congressional actions Public announcement about the outcome of the meeting

Why the Chairman of the Board of Governors(理事主席) Really Runs the Show Spokesperson for the Fed and negotiates with Congress and the President Sets the agenda for meetings(議程) Speaks and votes first about monetary policy Supervises(指導) professional economists and advisers

How Independent(獨立性) is the Fed? Instrument and goal independence.(工具與目標獨立) Independent revenue(收入獨立) Fed’s structure is written by Congress(架構來自於國會), and is subject to change at any time. Presidential(總統) influence Influence on Congress(國會) Appoints members(任命理事) Appoints chairman(任命理事主席) although terms are not concurrent(不同期) 23

Should the Fed Be Independent? The Case for Independence The strongest argument for an independent central bank rests on(基於) the view that subjecting It to more political pressures would impart(導致) an inflationary bias to monetary policy The Case Against Independence -Proponents(擁護者) of a Fed under the control of the president or Congress argue that it is undemocratic(不民主) to have monetary policy (which affects almost everyone in the economy) controlled by an elite(菁英) group that is responsible to no one

The Case for Independence Political pressure would impart an inflationary bias to monetary policy Political business cycle(政治經濟循環) Could be used to facilitate(促使) Treasury financing of large budget deficits: accommodation(更容易) Too important to leave to politicians(太重要而不能交給政客)—the principal-agent problem is worse for politicians

The Case Against Independence Undemocratic(不民主) Unaccountable(不可估計) Difficult to coordinate(合作) fiscal and monetary policy Has not used its independence successfully

Explaining Central Bank Behavior One view of government bureaucratic behavior is that bureaucracies (官僚)serve the public interest (this is the public interest view). Yet some economists have developed a theory of bureaucratic behavior that suggests other factors(其他因素) that influence how bureaucracies operate The theory of bureaucratic behavior may be a useful guide to predicting what motivates(動機) the Fed and other central banks

Explaining Central Bank Behavior (cont’d) Theory of bureaucratic behavior: objective(目標) is to maximize its own welfare which is related to power and prestige(聲望) Fight vigorously(精力旺盛) to preserve autonomy(自主權) Avoid conflict(爭端) with more powerful groups Does not rule out altruism(利他主義)

Structure and Independence of the European Central Bank Patterned after the Federal Reserve Central banks from each country play similar role as Fed banks Executive Board(執行委員會) President, vice-president and four other members Eight year, nonrenewable terms Governing Council (管理委員會)

Structure and Independence of The European Central Bank The ESCB(歐洲央行體系) encompasses(包括) the ECB(歐洲中央銀行)and the National Central Banks(歐盟各會員國的中央銀行)of the 27 EU member states The Eurosystem(歐元體系) comprises of the ECB and the NCBs (歐洲中央銀行) of only the sixteen countries that have adopted the euro(採用歐元) The decision-making process at the EMU(歐洲貨幣同盟) takes place at three levels The Governing Council(管理委員會) , the Executive Board(執行理事會) and the General Council(一般委員會) 30

歐洲中央銀行體系的組織與運作 目前歐盟有28個成員國

歐洲中央銀行及會員國央行之職責 共同職責 ECB「專屬職責」 NCBs「專屬職責」 1.制定貨幣政策 1.各國外匯資產操作 1.執行貨幣政策操作 2.發行鈔券 3.執行對公共機關之操作 4.執行對第三國之操作 5.收集統計資料 1.制定貨幣政策 2.確立ESCB的法規與架構 3.授權鈔券發行 4.制定及發布法規 5.決定ESCB對外代表 6.準備及說明ESCB年報 7.實施單一貨幣政策 1.各國外匯資產操作 2.參與金融機構之監理 3.代理國庫 4.參與國際組織 5.跨國合作

Monetary operations are not centralized(貨幣政策操作並未集中化) Differences Between the European System of Central Banks and the Federal Reserve System National Central Banks control their own budgets and the budget of the ECB(各國央行掌控其各自的預算及歐洲央行預算) Monetary operations are not centralized(貨幣政策操作並未集中化) Does not supervise and regulate financial institutions(不需要監督與規範金融機構)

Governing Council(管理委員會) Monthly meetings at ECB in Frankfurt, Germany 17 National Central Bank heads(17個國家中央銀行總裁) and six Executive Board members(6位係執行委員會成員) Operates by consensus(共識決) ECB announces the target rate(目標利率) and takes questions from the media To stay at a manageable size(維持可管理的規模) as new countries join, the Governing Council will be on a system of rotation(輪流) 「管理委員會」由23名委員組合而成，其中6位係「執行理事會」理事，17位係歐元區會員國央行的總裁 。 「執行理事會」理事任期8年，不得連任；各NCBs總裁任期至少5年(目前為5~8年) 。 理事必須由貨幣及銀行領域享有聲譽及專業經驗之人士擔任。

Governing Council(管理委員會) Executive Board and General Council The supreme decision-making(最高決策) body of the ECB, comprises the six members of the Executive Board(6位執行董事), plus the governors(總裁) of the National Central Banks of the 17 Euro area nations Formulate the monetary policy for the Euro area Executive Board (執行理事會) President, vice-president and four other members Ensure the day-to-day implementation of the monetary lines of the Governing Council 35

Governing Council Executive Board and General Council The General Council (一般委員會) President, vice-president of the ECB, representatives of the 17 Euro area countries and the 11 non-Euro zone EU Member States. Performs advisory(諮詢) tasks to the ECB, collects statistical information and standardizes the accounting operations of the NCBs 36

How Independent Is the ECB? Most independent in the world Members of the Executive Board(執行委員會) have long terms(8年長任期) Determines own budget Less goal independent Price stability(消費者物價年增率低於2%) Charter cannot by changed by legislation; only by revision of the Maastricht Treaty(馬斯垂克條約) 各會員國不能指揮ECB。 ECB不能貸款給各會員國。

How does the ECB differ from the Bundesbank? Implements the Eurosystem monetary policy as laid down in the EC Treaty(歐盟條約) Clears house(票據交換所) for its member banks and the banker’s banker The Bundesbank is the state’s banker and Federal Government’s fiscal agent(各州銀行家及聯邦政府財政代理人) Manages the currency reserves(通貨準備) of Germany Cooperates with other international institutions 38

Central Banks Round The World Bank of Canada Essentially controls monetary policy Bank of England Has some instrument independence Bank of Japan Recently (1998) gained more independence Central Banks in Transition Economies Czech, Bulgarian and Hungarian central banks 39

我國中央銀行的起源 民國31年發布的「統一發行辦法」，規定由中央銀行獨有發行貨幣的權利。 在政府播遷來台之後而中央銀行未復業之前，台灣銀行代理中央銀行下列業務：(1)發行貨幣、(2)辦理重貼現、(3)辦理國際匯兌業務、(4)收受存款準備金 、(5)代理國庫業務。 民國91年6月5日修正「中央銀行法」，中央銀行由總統府改隸屬行政院。

我國中央銀行的組織

Central Banks in Developing Countries and Emerging Economies The degree of independence of their central banks highly relates to the level of development of the financial sector and political institutions One main barrier is the low level of capitalization and their inability to generate sources of revenue. 42

Central Banks in Developing Countries and Emerging Economies People’s Bank of China Multinational Central Banks in Developing countries Central Bank Reforms in South America Currency Unions in Developing Nations The Trend Toward Greater Independence 43

Explaining Central Bank Behavior Theory of bureaucratic behavior: objective is to maximize its own welfare which is related to power and prestige Fight vigorously to preserve autonomy(保有自主權) Avoid conflict with more powerful groups(避免與有權團體發生爭端) Does not rule out altruism(利他主義) 44

Case for Independence Political pressure would impart an inflationary bias to monetary policy Political business cycle Could be used to facilitate Treasury financing of large budget deficits(有助於財政融資大量赤字): accommodation Too important to leave to politicians(太重要而不能交給政客)—the principal-agent problem is worse for politicians 45

Case Against Independence Undemocratic(不民主) Unaccountable Difficult to coordinate fiscal and monetary policy(財政政策與貨幣政策難配合) Has not used its independence successfully(獨立性從未成功過) 48