From Modelling to Governance –
The Influence of Economics on Financial Market Policies of Central Banks

Project management:
Prof. Dr. Stephan Lessenich
Project assistance:
Dr. Sarah Nies, Dr. Hanno Pahl, Dr. Jan Sparsam
Project term: October 1, 2015 – September 30, 2018

Central banks play a major role in shaping the monetary system of societies and financial markets. The knowledge of their policy area is mainly provided by macroeconomics. The social sciences know very little about the transformation of economic knowledge into policy practices. The research project aims at the empirical investigation of the discursive links between interpretations of the economic and political world generated by New Classical Macroeconomics and aspects of policy-making conducted by central banks. Two major sets of issues arise from this proposition:

  • Disciplinary knowledge in economics: How does New Classical Economics – beginning with Robert Lucas and the Rational Expectations Revolution and culminating in Real Business Cycle-theories –conceptualize the economy and the role of the policy of central banks?
  • Policy knowledge and policy practice of central banks: How does knowledge produced by economics transform into the practices of central banks?

The research project combines a (meta-)theoretical perspective on economics with an empirical investigation of the interfaces between the system of science and the system of finance. Both sets of issues will be approached with a discourse analysis rooted in the sociology of knowledge. The empirical research, designed as a genealogy of policy-knowledge of central banks, is based on a document analysis.

The project bundles three major working stages:

The first stage addresses the construction of knowledge in economics. The goal is to analyze the important body of work developed by the main actors of New Classical Macroeconomics (i.a. Robert E. Lucas, Thomas J. Sargent, Edward C. Prescott, Finn E Kydland). The text material will be approached by addressing three questions:

  1. How do economic models shape cognitive path dependencies in the interpretation of economic processes?
  2. How does scientific expert knowledge produced by economics translate into meaningful non-scientific practices?
  3. In what way does New Classical Macroeconomics claim a higher empirical validity for their models?

The second stage consists of an analysis of strategical documents from Federal Reserve Banks that entail the implementation of the proposals by New Classical Macroeconomics.

Finally, the third stage comprises an analysis of documents of the Bundesbank and the European Central Bank. The research tasks for both text corpora are:

  1. the impact of the Policy Ineffectiveness Proposition on monetary policy;
  2. the ramifications of the assertion of the superiority of independent central banks;
  3. the restriction of monetary policy to monetary stability and the negation of other policy tasks;
  4. the broad non-consideration of the (endogenous) crisis-proneness of markets and especially financial markets.
Gefördert vom Bundesministerium für Bildung und Forschung
< Januar


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