Dr. Moschella's new book, Unexpected Revolutionaries: How Central Banks Made and Unmade Economic Orthodoxy, posits central banks are anything but "boring". She argues that central banks around the world have transformed political economy by adapting unconventional policy levers to address issues that go beyond the limited mandate of price stability. She demonstrated that even though central banks maintain their independence from electoral politics, they are responsive to public interest and rely on political support for legitimacy.

While evaluating the history of central banks, Dr. Moschella underscored the importance of central banks and their commitment to price stability in allowing liberalism to flourish. The widespread policy diffusion of independent central banks with the power to exercise interest rates as the primary tool of monetary policy became the lynchpin of neoliberal economic order. As countries went through periods of economic hardship, central banks expanded the tools at their disposal to address goals besides inflation.

Dr. Moschella claimed that central banks need to maintain public's trust in the institution, not just to satisfy the expectations of the financial markets. She thus takes a political approach that complements an ideational narrative approach that emphasize a technocratic view of central banks instead. Her analysis starts in the 1970s-1980s, when Paul Volcker intervened aggressively through a series of economic and political measures to bring down stagflation. The world took notice of the central bank's power to not just manage the macroeconomic scenario.

In a post-2008 scenario, central banks used unconventional tools and reviewed their monetary strategies also as a signal to acquiesce public discontent. For example, the Federal Reserve added "inclusive growth" as a stated goal. Similarly, the European Central Bank addresses climate change through banking supervision of non-financial reporting, reforming collateral eligibility, and developing climate change oriented macroeconomic knowledge. This dichotomy of asserting independence while also courting political legitimacy makes central banks a "peculiar" institution.

Dr. Moschella further highlighted the need for cohesion between central bankers and political principles to coordinate monetary and fiscal policies, without compromising the bank's independence. Support from political leaders is crucial in times of distress, especially when enacting sensitive monetary policies like quantitative easing. Conversely, if political leaders become acrimonious towards bankers, as was the case with Fed chairman Jerome Powell and President Trump, public's trust in central banks declines, limiting their ability to enact stabilization measures.

With a new perspective on a key international institution, students led an informative discussion on contemporary challenges to the global economy. The discussion touched on topics ranging from the efficacy of inflation targeting, USA's "soft-landing" following interest rate hikes, and stability of the Eurozone. As the Eurozone proves resilient despite earlier missteps, ECB's readiness to support countries like Italy through unconventional channels from interest rate risk also reveals the responsiveness of the bank towards the public. Given the Central bank continues to learn from previous crises, Dr. Moschella shared a cautiously optimistic outlook for the European economy.

hosted by Professor Veronica Anghel


The lecture will be a conversation around professor Moschella's book Unexpected Revolutionaries. How Central Banks Made and Unmade Economic Orthodoxy (Cornell University Press 2024).

Central banks are typically regarded as conservative, politically neutral institutions that uphold conventional macroeconomic wisdom. Yet in the wake of the 2008 global financial crisis and the 2020 Covid-19 crisis, central banks have upended observer expectations by implementing largely unknown and unconventional monetary policies. Far from abiding by well-established policy playbooks, central banks now engage in practices such as providing liquidity support for a wide range of financial institutions and quantitative easing, and have even stretched the remit of monetary policy into issues such as inequality and climate change.

Moschella argues that the political nature of central banks lies at the heart of these transformations. While formally independent, central banks, as public institutions, need political support to justify their policies and powers. To gain such support, central banks carefully manage their reputation among their audiences?elected officials, market actors, citizens. Challenged by reputational threats brought about by twenty-first century recessionary and deflationary forces, central banks such as the Federal Reserve System and the European Central Bank strategically deviated from orthodox monetary policies to preempt or manage political backlash and to regain public trust. Central banks so evolved into a new role only in coordination with fiscal authorities and on the back of public contestation.

Advancing this argument, Unexpected Revolutionaries offers empirical background for necessary discussions on the future of the neoliberal macroeconomic regime, the democratic oversight of monetary policymaking, and the role that central banks can?or cannot?play in our domestic economies.

Manuela Moschella is Professor of Professor of Political Science at the University of Bologna . She is one of the editors of the Review of International Political Economy and Associate Fellow at the Europe Programme at Chatham House.