Central Banking in Developing Countries after the Crisis: What Has Changed?

The aim of this paper is to give a brief account of the course of monetary policy in developing countries after the crisis with special emphasis on the pros and cons of notable policy shifts. The main arguments of the paper are as follows. The pre-crisis consensus over how monetary policy should be conducted was based on false premises. In response to the crisis, mainstream thinking has revised itself over the course of recent events. However, the resulting modified framework is far from a radical shift and the core of the previous consensus is preserved. In line with this, there is also a shift in central banking in developing countries with respect to a more complex and comprehensive monetary policy with multiple goals and multiple tools. Yet again, this shift is insufficient to trigger a major change in understanding and implementing monetary policy. In the absence of a rethinking of the international financial architecture, developing countries are still heavily exposed to external shocks, restraining independent monetary policy.