College of Central Bankers Fellow Spotlight: Charles Plosser on Central Banks and Supply ChainsNovember 16, 2021
On November 13, in a recent message from CCB Chair, Peter Gold, poses the following questions to the College of Central Bankers:
What are the roles (if any) of central banks/monetary policy in 2-5 year serious and global disruptions in supply chains? Any interventions that are special or different? Perhaps directly with supply chain constituents? Or do central banks try to address the impacts of such disruptions/impacts through conventional means on the various economies?
With some central banks and similar organizations now focusing on housing, climate change, equal access to opportunities, this question (a tad on the micro end to some) may not be that non-contextual.
Do you have a view?
Charles Plosser, Former President of the Federal Reserve Bank of Philadelphia, and CCB Fellow, responded with the following:
Central banks should stick to their knitting. They are making their “to do list” too long and adding things they aren’t designed to do. This is likely to result in distractions from doing what they are designed to do.
They are not an insurance company or a commercial bank or a development bank for the government. They are not a taxing authority or spending authority to redistribute income or allocate capital according to politically favored or popular industries. What do central bankers know about restructuring re-engineering firms or industries? Nothing.
Their mandates need to be limited and so should their tools or their independence will vanish to the detriment of all.
We thank Dr. Plosser for his permission to share his response and invite you to reply below with your views on this topic.