Overview

The world’s central banks have confronted crisis after crisis in recent years—both before and since the global financial crisis. Yet many of these events seem to take central banks by surprise, obliging them to improvise. In this important study, Patrick Honohan, former governor of the Central Bank of Ireland, calls on central banks to make preparation for crisis management a core activity. They should be ready to deal with the unexpected. Departing from the rather sedate mode of operation appropriate to their normal focus on price stability and risk control, they must speed up their decision making, change their style of communication, and be more open to cooperation with governments when a crisis hits. They need to keep careful track of changing financial market practices, evaluating solvency in murky situations and quickly weighing the tradeoffs involved in measures that can help contain the crisis but have adverse side effects. The Central Bank as Crisis Manager warns that failure to recognize these challenges could be costly for society.

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Reviews

The Central Bank as Crisis Manager is a wonderfully written guided tour of crises led by a first-rate financial economist with experience analyzing many different financial systems. I can think of no other volume that combines first-rate financial economic analysis of such a variety of crises with so many essential insights for central bankers. -- Gerard Caprio, William Brough Professor of Economics Emeritus, Williams College; coauthor of <i>The Guardians of Finance: Making Regulators Work for Us</i> Mismanagement of macro-financial crises is extremely costly, yet crisis preparedness rarely receives the attention it deserves. Patrick Honohan’s insightful book provides a much-needed analysis of lessons learned from numerous recent crises, offering valuable guidance on how central banks can step up their game in managing crises. It is essential reading for anyone interested in improving policy. -- Athanasios Orphanides, Professor of the Practice of Global Economics and Management, MIT

Author Information

Patrick Honohan, nonresident senior fellow at the Peterson Institute for International Economics, was governor of the Central Bank of Ireland and a member of the governing council of the European Central Bank.

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