Progress of Economic Science on Central Banking
The passage below is a comment by former head of the Fed, Paul Volcker.
(p. 25) . . . I recently commented to some of my economist friends that I'm not aware of any large contribution that economic science has made to central banking in the last 50 years or so.
Our ability to forecast is still very limited. The old issues of the relative role of fiscal and monetary policies are still debated. Markets are certainly more complex, and some of the old approaches toward monetary control seem less relevant. Recent events have certainly illustrated limitations in our understanding of the economy.
The advent of floating exchange rates, which partly reflects a shift in academic thinking, has certainly been important, but the underlying problems of policy seem familiar.
(Note: ellipsis added.)