Research project

The dissolution of the Bretton Woods agreement on fixed exchange rates, the rapid increase in international capital flows and the liberalization of the financial sector itself enabled its extraordinary growth since the 1970s. In parallel, Western central banks successfully combated the high inflation rates that were among the prominent crisis symptoms of the decade by pursuing a restrictive monetary policy. Both phenomena seemed to evidence a retreat of the state from the economy: The independence of central banks from political directives facilitated stability-oriented control of the money supply instead of short-term interventions in support of economic policy objectives; the liberalization of banking and capital movements aimed at unleashing market forces in international economic competition.

However, these processes of change were always based on legislative decisions, which in turn generated need for political debate and re-regulation. Concentrating on monetary and capital market policy in Great Britain and the Federal Republic of Germany from the 1970s to the 1990s, the project examines the tensions between increasing market orientation and persisting regulatory claims. By focusing on actors, negotiations and decisions, the project also aims to examine the practical consequences of the much-cited theoretical paradigm shift from Keynesianism to monetarism, which was in fact soon followed by new syntheses of both approaches, and the knowledge base of monetary policy.