In its general lines, the subject of this book is well known. The twentieth century was par excellence the era of fiat money, one of the great achievements of human ingenuity, arguably on a par with the steam engine and electricity. To work properly, however, it had to be used with caution because “swept along by animal spirits, markets can behave emotionally and perversely,” as the vice-chairman of the Fed reminds us in his postscript here (p. 242). Therefore, this had to be also the century of the central bank, an institution that emerged during the turbulent times after World War I and, through many metamorphoses, endures still today. Could a soothsayer (or even an economist) of the inter-war period have foreseen the shape of the brave new financial world of the early twenty-first century? It is unlikely. That deregulation and competitiveness could ever come to be considered as important as macroeconomic stability, that flexible exchange rates be regarded as acceptable, and that the lines between banking, insurance, and securities might become so blurred, would simply have been too extravagant to contemplate. The merit of this volume is that it shows, with a wealth of detail, how this unpredictable journey was made by eight west European countries and how diverse were the paths they followed.

The book consists of an introductory background section, followed by a chapter for each country, and ends with a section on Prospects for International Banking and Financial Systems, by four distinguished central bankers. The eight “national” chapters vary somewhat as to their focus but all of them do a more than satisfactory job. The hero throughout is the central bank, the plot its unremitting struggle for stability, a goal which in itself was far from stable, as society's concerns switched from systemic aims in the inter-war period, to a more macro-economic and exchange-rate-oriented approach, between the 1940s and the 1970s, to price and systemic stability again from the 1970s until now. Along the way, regulatory functions changed many times too. In the 1930s central bankers learned to be lenders of last resort and to impose structural controls on banking. In the 1950s and 1960s, the discount rate came to the fore, credit directives to banks were issued liberally, and most central banks became subordinate to political authority. During the last 30 years an earthquake hit financial systems. Banks came to be regarded as any other firms, slow growth was no longer blamed on them because now they were enjoined to be “efficient,” no longer simply “stable.” Liberalization, internationalization, and innovation all led to intense competition, which posed anew the problem of systemic stability and the need for supervision to be thought of in a completely differently way, in a world where financial institutions now were no longer just banks and did a bit of everything, everywhere. Ex post remedies were replaced by ex ante solutions, and capital and liquidity requirements had to be adjusted for risk.

The multiplicity of outcomes depicted in these pages is hardly surprising when one considers how much monetary and financial policies were shaped by (changing) theories, path dependence, economic conditions, and politics, and how these varied over space and time. Logically, the Bundesbank in the 1950s and 1960s was immensely different from the Belgian National Bank or the Banco de Portugal. But as Pablo Martin Aceña writes, there was also a learning curve to being a central banker and it was not the same for all. Factors such as the country's external exposure, the degree of internal competition and the extent of subjection to the Treasury, all conditioned perceptions and led to some tools being favored over other ones. For all central banks, however, the question that has to be posed and would have merited a fuller and more systematic answer here is what future do national central banks have in Europe? Are they on a circular course, in some sense back to their nineteenth-century identity, as suggested by Aceña, are they simply on their way out, as Marco Onado seems to think, or will they have to reformulate their role in order to survive, as Olivier Feiertag claims? The issue hinges on the future of bank supervision, central banks' last remaining important function. Undoubtedly, its importance is enormous and bound to grow, as liberalization fans the animal spirits and allows the markets to behave emotionally and perversely. Do only central banks have the local know-how to perform it and must it be carried out internally when the time is one of rising supranationalism and cross-border financial activity?

The weakness of this book resides in the dispersion of its contents, a frequent problem in this genre of conference volumes, perhaps even an intrinsic one. The reader gets lost in the welter of detail, the profusion of approaches and the low adherence of contributors to a common agenda. The remedy would be a strong introduction that provided a clear framework of analysis, that wove the disparate parts together and generated stimulating comparisons. This is lacking but it is compensated for by some very interesting general comments in the chapters by Onado on Italy and Prast on the Netherlands, as well as by remarks in the final Prospects section. The net result is a book that contributes to an important and much visited field.