In This Review

The Quiet Revolution: Central Banking Goes Modern
The Quiet Revolution: Central Banking Goes Modern
By Alan S. Blinder
Yale University Press, 2004, 144 pp

This short book, a revision of three lectures given at Yale by the Princeton economist and former governor of the U.S. Federal Reserve System, skillfully discusses, with sophistication but in nontechnical language, the recent evolution of central banking in well-to-do countries. Blinder approves of progress toward greater transparency, more collective decision-making, and greater attention to financial markets and of the move toward decision by committee (which the Federal Reserve has always had). Central banks, once seemingly contemptuous of financial markets, now pay much more attention to bond and stock price movements, foreign exchange rates, and diverse forward markets. But Blinder cautions against assuming that financial markets reflect thoughtful long-run expectations. Much evidence suggests that financial markets are dominated by short-run dynamics, and central bank attempts to meet their expectations could steer monetary policy in the wrong direction.