Good Central Banking

Central Banking in Developing Countries by Anand Chandavarkar; Macmillan Press, UK, 1996 and St Martin's Press, Inc, US, 1996; pp xiv + 289, THIS monograph is an excellent example of scholarly work embedded in thorough research, complemented by the author's experience as a central banker and an international civil servant. It genuinely deals with developing economies by continuously linking analyses and prescriptions to actual developments in various countries. Often, it is easier to deal with concepts, and then in the last couple of paragraphs of the chapter refer to country experiences. The author, com- mendably, does not take this easy route. I think the author's successful endeavour to effectively organise the subject of central banking with exceptional clarity will be enduringly important for central bankers, present and future, and students of money and banking. The governor-designate of the Reserve Bank of South Africa, who is serving a one-year apprenticeship under the present incumbent before he takes over, should keep this book at his bedside! The book's wider legacy is the singularly brilliant manner in which the author has woven together analytic economics, institutional and bureaucratic theory, public choice and political economy to present a comprehensive and coherent treatment of a subject that is inherently complicated. The list of objectives for central banking that is enunciated in the first chapter establishes the theme around which the rest of the book is organised. These include the conjunctural objectives of price stabilisation and exchange rate management; long-term objectives of establishing payments systems and financial infrastructure; and sectoral objectives including prudential supervision and deposit insurance. This list should be of considerable help to those who want to get a handle on the organising principles that underpin contemporary central banking. The monograph is successful in filling the gap in the literature between the institutional and theoretical developments pertaining to central banks in the developed economies and the challenges of achieving effective central banking in emerging or developing economies. The author provides an up to date framework for analysing most of the important issues, viz, monetary policy, exchange arrangements, regulation and supervision, developmental role, central bunk losses, organisational reform, informal finance and the holy grail of central bank independence.