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Abstract

This dissertation considers the changing relationship between central banking and the financial markets since the collapse of the Bretton Woods pegged exchange rate system in late 1973. It does so by way of three particular ideas. Firstly, the image of central banking having become ‘auditorial’, namely independent of government and financial institutions and functioning by increasingly indirect means consonant with the rise of virtual finance. Secondly, the intuition that today’s global financial architecture is essentially made up of three elements - trade, finance and central banking - and that these are analogous to the three main elements of accounting - income and expenditure statements, the balance sheet, and the closing entries. Thirdly, the device of a theorem derived from Keynes’s 1923 Tract on Monetary Reform, expressed in simple sketch form.

The whole study is informed by the view that events since 1973 represent a return to the key question posed at the end of WW1: What follows the gold standard? The answer then was (or could have been) to give the central bank autonomy albeit in a democratic setting as a foil to freedom in the financial markets. Instead, for the greater part of the twentieth century, humanity embarked on a great detour, which saw the generalised capture of central banks by government (central bank dependence) and extensive interventionist regulation. Since the ‘closing of the gold window’ in 1971, the rise of central bank independence and the growing dominance of the financial markets suggest this is the ‘truer’ course of history, which is what the research seeks to map.

The topic survey grounds the research in current debates, beginning with a discussion of Keynes’s Tract, which remains a much-referenced work for many authors in this field. It then surveys the many key topics related to the thesis and ends by distilling the concept of auditorial central banking out of the central bank independence literature.

The aim of the research is to explore the hypothesis that auditorial central banking represents the underlying trend of central bank evolution, as evidenced by four main and two secondary case studies - the Banco Central do Brasil, the Reserve Bank of New Zealand, the Federal Reserve Bank of the United States and the Bank of England, and the European Central Bank and the Bank of International Settlements.

Of particular interest is whether the Bank of England is representative of auditorial central banking and whether its evolution has significance and replicability beyond the UK context.

Publication Type:	Thesis (Doctoral)
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Bayes Business School Doctoral Theses Bayes Business School > Finance Doctoral Theses

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