Money, Banking, and Financial Markets

Understand the principles, understand the future

Interview with John Taylor

Mary and Robert Raymond Professor of Economics at Stanford University; George P. Schultz Senior Fellow in Economics at Stanford's Hoover Institution, former Undersecretary of the Treasury for International Affairs; former member of the President's Council of Economic Advisors; and former Director, Stanford Institute for Economic Policy Research. 

Has the experience of the crisis changed your view of the central bank policy tool kit?

Undersecretary Taylor: My reading of what has happened in the years leading up to and following the crisis, and including the crisis itself, is that we deviated from some of the policies that worked well for a couple of decades or more -during the so-called Great Moderation- and that has led to problems...

Central bank independence is controversial. It requires the delegation of powerful authority to a group of unelected officials. In a democracy, this anomaly naturally raises questions of legitimacy. It also raises fears of the concentration of power in the hands of a select few.

An independent central bank is a device to overcome the problem of time consistency: the concern that policymakers will renege in the future on a policy promise made today ....

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... the site where you can learn about finance and economics. We provide commentary on events in the news and on questions of more lasting interest. Because the financial system is constantly evolving, our analysis is informed by a set of core principles: understand the principles, understand the future. The opening excerpts of our two most recent posts appear above. For prior posts, click on the Commentary link to the left, or on the month-by-month Archives to the right. Alternatively, if you are interested in a specific topic, use the tags.

The site also provides material related to our textbook, Money, Banking and Financial Markets, 4th edition, 2014. The Five Core Principles on which the book is based are highlighted here. In addition, Cecchetti and Schoenholtz 4e systematically integrates the use of economic and financial data from FRED, the online database provided by the Federal Reserve Bank of St. Louis. Click on FRED Lessons on the left to access help on how to use this incredible resource.

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