The history of independence of Central Banking

The history of independence of Central Banking

The World Economic Forum claims that “Independent central banks that can conduct monetary policy largely free from political interference have historically demonstrated a strong ability to manage inflation. Central bank autonomy is arguably the best monetary policy governance structure ever devised, as illustrated by the experience of emerging markets in recent decades.”

However, this was not always the case. In the 1970’s global oil price surges led to a spending spree by Middle Eastern nations that resulted in a huge loan overhang to emerging markets by Western intermediaries, which resulted in stagflation as countries tightened their monetary policy. Dropping the gold standard, deregulation and the floating of currencies in advanced nations without a strong regulatory model resulted in major crises such as the Savings and Loans fiasco in the USA, and problematic bank portfolios in countries such as Australia. Mexico, Peru and Poland in order to gain outside finance to restructure their huge debt obligations granted independence to their central banks. Those countries allowing political interference fared far worse.

In this seminar, Dr Currie discusses the history of central banking with reference to the evolution of the current Australian financial system, detailing the role of parliamentary inquiries such as the Campbell Committee, the Martin Inquiry and the eventual restructuring of the role of central bank prudential supervision as distinct from monetary policy. The differing structures of banking is compared across advanced nations to monetary blocs such as the European Union, to that in China and Russia as well as to the those in less developed nations. The functions of supranational entities such as the IMF, the World Bank and the Bank for International Settlements is contrasted to the power and influence of national systems.

This covers the period from the formation of the first Central Bank in Sweden to our current situation in 2024 when the main debate now hinges on the link between inflation and interest rates.

This event is a hybrid event and can be attended in-person or virtually.

About the Speaker

Dr Carolyn V. Currie completed her PhD under the late Warren Hogan and the late Judy Yates with a thesis investigating the regulation of Financial systems. Dr Currie also helped develop courses in Banking and later built a thriving practice advising the central banks in China, Indonesia and Turkey. 

In the 1970s Dr Currie worked in merchant Banking as the first female director at Chase NBA Group where she developed a large loan portfolio centering on News limited and Australian Consolidated Press.

She has also worked as a regulator at the New South Wales Corporate Affairs Commission where in 1986 she was brought in to deal with 360 new floats as the stock market boomed post deregulation.

After several years travelling extensively training international banks in credit assessment and structuring project finance and derivatives she was recruited back into the regulatory arena in 1990 analysing financial accounts to detect false and misleading statements in connection to what was known as the “16 white collar criminal corporates” which had borrowed extensively from banks and defaulted, causing a massive banking crisis.

In that year she also initiated the Martin inquiry into Banking by giving evidence at the House of Representatives Standing Committee on Public Finance. That committee resulted in recommendations that changed the shape of the Australian Financial System and were recorded in a paper requested by the Honourable Stephen Martin. 

"I started economics with a desire to further Jeremy Bentham’s goal of the greatest happiness for the greatest number and I remain committed to that goal"

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