The National Bank of Belgium is a fortunate institution. There is a considerable array of publications that tell its history from its inception to the present times. Van der Wee and Tavernier wrote an excellent study in 1975 focused on the interwar period, and more recently, in 2005, Buyst, Maes, Pluym and Danneel have produced a full and very illustrative history of the Bank stressing its links with the international economy. The volume written by Ivo Maes serves to increase our knowledge of the institution, one of the oldest in the Continent, founded in 1850.

Maes' book focuses on the creation, role and development of the research department of the National Bank of Belgium, and deals also with the major economic policy debates that took place within the Bank and between the economists of the Bank and the academic community, particularly with the active members of the Economic Institute of Leuven University.

Research departments made their appearance in the last decades of the nineteenth century in the three major European central banks: the Bank of England, the Banque de France and the Reichsbank. Towards 1900 all three had an office that was responsible for compiling statistics, preparing reports and advising, where necessary, their senior officials. At the remaining European central banks, research offices came into being after World War I, either in the 1920s (Belgium and Italy, for example), or in the 1930s (Portugal and Spain).

The creation of such research departments was in response to a common impulse: the need for information on developments in the domestic economy. They were set up to meet the demands for information and advice by the upper echelons of the institutions that needed to understand financial phenomena and had to act in an increasingly complex economic world. From the outset, research departments were staffed with leading and brilliant economists, mostly drawn from academia. An exceptional figure, in terms of intellect and personality, was usually involved, but also one capable of attracting young economists who would form the initial core from which the research unit developed. The other catalyst was the Bank's senior management; very often it was the Governor who, concerned to improve the management of the institution, considered it necessary to set up a small group of monetary and financial experts to advise him.

Maes' book is divided in four parts. The first traces the origin of the economic service created at the beginning of the twentieth century. It began by collecting statistics and by opening a library. The key figure was Albert-Edouard Janssen, a graduate of Leuven University who joined the Bank in 1908 and set about organising the new office. Later he rose to the position of Director General in 1919 and was behind the formal establishment of a full-fledged economic service in 1921. The second part of the book focuses on the interwar years, a difficult period for Belgium which was hit severely by the postwar crisis and later by the Great Depression. As a matter of fact, the serious economic difficulties unleashed by World War I were the trigger to organise a research unit. The inflationary spiral and the heavy depreciation of the exchange rate of the franc led the country to a real economic abyss. The search for solutions underscored the pressing need to improve the understanding and analysis of monetary phenomena, and hence, amid an economic and monetary storm, the Bank created its Service d'analyse économique in 1921. The key protagonist was Paul van Zeeland, a young graduate from the universities of Leuven and Princeton. It was Van Zeeland who, at the behest of his mentor Janssen, structured the department and assumed its leadership. In the interwar years the Service expanded and young economists were recruited to staff its three offices. By 1930 the department consisted of five sections and it had begun to produce fine reports on monetary, banking and exchange rate issues. In the 1920s and later during the depression the Service participated in all the policy debates: it defended the stabilisation of the Belgian franc in 1926, and it was against its devaluation thereafter.

In the third part of the book, Ivo Maes discusses the role of the Research Department – as it was named after 1948 – in the second half of the twentieth century. The author pinpoints the major monetary events of the period and examines the policy debates and controversies in which the National Bank and its economists were involved. The prominent figure after the war was Franz De Voghel, a Keynesian professor from Leuven, who propelled the department and defended, somewhat oddly, both exchange rate stability and expansionist credit policies to foster private and public investment. An interesting question raised by Maes was the widening gap in the 1970s and the 1980s between the economists of the Bank and the academic community. The author recalls that the members of the Research Department were reluctant to accept new methods of economic analysis. Hence while academic and policy-making institutions in Europe and America were moving to the construction of econometric models, the Bank did not go in this direction. It was not until 1990 that the Bank's Research Department reacted and established a so-called ‘model group’. The book ends with a last part devoted to reviewing how the office has evolved after the establishment of the European Central Bank (ECB) and the adoption of the common currency. Far from losing importance, the services d'études of the national banks have become essential in designing the policy of the ECB. The economists of each of the national banks participate in the preparation of the single monetary policy by briefing the governors, collecting the national financial statistics and producing the relevant monetary reports very much as they did before the adoption of the euro.

One merit of Maes' book is that he has interwoven the history of the research department with that of the National Bank. He shows that the evolution of the department was closely related to the transformation of the Bank from a bank of note issue into a modern monetary authority. Another merit is the importance attributed to personalities. He stresses quite rightly how men like Janssen, Van Zeeland, De Voghel and the more recent directors modelled the research office according to their economic ideas and according to what they believed were the monetary priorities of the country.

Maes' volume is not an official history of the Research Department of the NBB, although it is obvious that it is written from within the institution. There are advantages being close to the sources, but there are also disadvantages being close to the object of study. Maes, however, does point to some of the injudicious advice defended by the economists of the Bank, as well as to some of their analytical weaknesses. He criticises the delay in adopting modern methods of economic analysis. He also takes a critical view when dealing with the attachment of the NBB to monetary stability, especially exchange rate stability. This, Maes argues, was a constant feature in economic and monetary thinking at the NBB and not only confined to the monetarist period. Belgian authorities defended a fixed exchange rate both in the 1930s, despite the poor behaviour of the trade sector and the abandonment of the gold standard elsewhere, and later in the 1970s, despite the breakdown of the Bretton Woods system and the fact that the US and other major nations allowed their currency to float.

The book is well organised and in 150 pages one learns a lot about the National Bank of Belgium and its research office. A missing point is the lack of international comparisons. Maes could have made an attempt to compare the performance and evolution of the Research Department of the NBB with similar offices in other European central banks. I think the book would have gained in interest to both Belgian and non-Belgian readers.