When I agreed to review this book, I did so in part out of interest in any new tome on the topic of central banking by a political scientist and partially out of a sense of duty to my colleagues as an author of an earlier Cambridge book on central banking. I have been well rewarded, having read this highly thoughtful and useful work by George Shambaugh. My own work on the topic is more oriented to contributing to the theoretical literature in international political economy and international relations theory, as well as the analytical literature on central banking and the social relations of credit and debt. In contrast, Shambaugh’s highly ambitious offering reads primarily as a contribution to the literature on economic policy making: he expands the subjects of his inquiries from central bankers and private market actors to a larger group of governmental and supranational economic policy makers, including finance ministers, state executives, and other government managers, with positive effects.

Shambaugh very usefully expands on a veto player model of investor preferences developed by Andrew MacIntyre to create his own, much more complex, but extremely useful risk intervention curve (RIC); the RIC establishes useful relationships between economic policy flexibility or constraint and the attendant risks (high or lower) to investors making market decisions within these policy parameters. He carefully defines and distinguishes between four types of risks that investors face: political risk, policy risk, market or system risk, and specific-actor or product risks. Each of these four appropriate designations of risk may be mitigated or exacerbated by various economic policy maneuvers, which he describes. He studies various strategies that economic policy makers can employ to manage uncertainty and to reduce risk. He then develops six variations of these strategies and uses them in the empirical sections of his book—to good effect and with admirable erudition—to explain the policy mix struggles attending his three major empirical cases: the valuation of the Argentine peso and the Argentine debt default, the US response to the 2008 financial crisis, and the various crises that have been spawned in the Eurozone by the 2008 financial crisis, the Grexit crisis, and serious and ongoing Eurozone difficulties. Shambaugh’s highly erudite scholarship is on full display in these luminous empirical chapters, and it is a pleasure to read accounts so thoroughly well researched. The Argentine and US case chapters conclude with useful and more than plausible “lessons” that I am persuaded comport to the predictions of his RIC model. The Eurozone chapter does not conclude with lessons, but as a supranational entity, its difficulties are in some ways unique.

Although Shambaugh’s primary audience is clearly the economic policy community, he provides many very welcome offerings to international political economists and international relations theorists, particularly those of a constructivist bent. Shambaugh is keen to point out that his RIC model “adds agency” to the veto player model of investor risk by relaxing the assumption of a fixed number of policy veto players (p. 25). This removes a “structural constraint” and permits economic policy actors to exercise agency. Shambaugh also invokes the aspect of the contingency of outcomes. He argues that the impact of individuals and institutions on policy making is contingent on the degree to which their authority is accepted or contested by other actors. Just as constructivists argue that actors’ interests and motivations are dependent on the structure of actors’ identities and interests (in both socially and historically contingent contexts), Shambaugh argues that policy flexibility and the efficacy of policy decisions are shaped by (and contingent on the outcomes of) competition for authority among would-be policy makers or veto players. This contingency arises from the context-specific relationship between market risk and policy flexibility, which helps shape the expectations of financial market actors.

Certainly, all of these cognitive variables—context dependence, contingency, actor expectations, and social agency—tick most of the boxes for generating a constructivist argument, although I cannot speak to Shambaugh’s intent. The term does not appear in his book or index. Yet he moves on to a discussion of the constitutive power dynamics of “particular central bankers and economic policy makers” to move the expectations of private market actors in and out of the “comfort zone” of his RIC curve. He argues that this capability is “a function of their constitutive power dynamics” (p. 28), which in turn are predicated on the policy makers’ ability and willingness to exploit or expand their authority, build and maintain deference from national executive authorities, and generate the political capacity to implement their expectation-transforming policies (pp. 28–33). The sources of these “constitutive power dynamics” are authority, deference, and political capacity and whether these attributes are either accepted or contested by other powerful actors within the government and the market active segment of the public. This discussion sets Shambaugh up for six likely outcomes, or risk management or mitigation scenarios. These he summarizes in tabular form in Figure 2.5 (p. 34) and uses them to good effect in his three empirical case studies. Admittedly, Shambaugh’s analytical discussions in his first two chapters, where he lays out his RIC model and his larger argument, are not an entirely easy read, but Shambaugh writes with a careful rigor that renders his meanings consistently coherent and often insightful.

Since Shambaugh’s primary audience for his highly insightful book is clearly the policy community and not the IR theory community, I shall not criticize him with the frequent and tedious complaint that “you should have done it my way, according to my theoretical school.” Yet I will briefly raise the issue of his consistent claim of having uncovered “second-order powers” of policies and institutions, particularly when he discusses “constitutive power dynamics.” He generously cites Peter Bachrach, Morton Baratz, Michael Barnett, Raymond Duvall, and me as earlier developers of the concepts of “power to control an agenda, define and enforce the rules of the game, and delineate the roles that actors play” (p. 214). Shambaugh has employed so many other constructivist concepts in his work that he might have updated his “second order powers” with variations of Barnett and Duvall’s (2005) “structural,” “institutional,” and “productive” forms of power, some of which I have since argued are themselves variants of “deontic” power.

Finally, I worry that the publisher has done Professor Shambaugh a disservice with the size of his many useful figures and tables. I found some so small as to be readable only by accessing the online version of the book and enhancing the scale. I detected another small error only because it involves the use of my name. I have not enjoyed the privilege of meeting Professor Shambaugh: he can easily be forgiven for being unaware that my surname is simply “Hall” and not “double barreled.” Yet I worry that spare copyediting might also have given other scholars entirely new published identities. These matters aside, the book is a significant accomplishment bound to be highly useful to the policy community and students of international political economy, and I highly recommend it to both.