Wow! eBook
The Art of Monetary Policy: Lessons from Sun Tzu for Central Banks
Author(s): Kristin Forbes (Author)
- Publisher: The MIT Press
- Publication Date: April 21, 2026
- Language: English
- Print length: 136 pages
- ISBN-10: 0262052334
- ISBN-13: 9780262052337
Book Description
When central banks were forced to innovate and develop a multifaceted set of new weapons in response to the 2008 global financial crisis and 2020 COVID-19 pandemic, the result was a substantial expansion in their authority and reach. In
The Art of Monetary Policy, Kristin Forbes draws lessons for monetary policy of the last two decades from the principles of Sun Tzu, the author of The Art of War, a Chinese philosopher and military strategist from the fifth century BC.Tzu proposed several key principles for success—tenets that apply to monetary policy and the battlefield today: (1) plan in advance for the next battle; (2) accept and adapt to the inevitability of powerful, external shocks outside your control; (3) establish a strong tactical position; (4) develop a variety of weapons that can be combined for different maneuvers and situations; (5) maintain flexibility so that you can quickly modify your strategy; and (6) consider the longer-term costs when evaluating the trade-offs of different approaches. These principles provide insights into what central banks did (and did not) do well over the last two decades, as well as how they should deploy interest rates, balance sheets, emergency support programs, forward guidance, and macroprudential tools in the future.
While the optimal strategy in both war and monetary policy is more of an “art” than a science, adopting these principles can improve our ability to battle the next crisis and build more resilient economies during peaceful periods.
Editorial Reviews
Review
“Kristin Forbes provides a clear and compelling evaluation of central bank policy over the past 15 years. She helps us understand how monetary policymakers can use this experience to further enhance their effectiveness going forward.”
“Kristin Forbes provides a concise, engaging, comprehensive, up-to-date, universally relevant, and well-judged guide to the conduct of monetary policy. This book should be on the desks of central bankers around the world, while also being highly accessible to a wide general readership.”
“Blending history, strategy, and economics, Kristin Forbes offers central banks an invaluable guide to navigating uncertainty, balancing trade-offs, and securing economic resilience in the face of unprecedented global challenges.”
“Kristin Forbes applies lessons from Sun Tzu’s
The Art of War to central banking in these uncertain times, even as she describes masterfully the recent conduct of monetary policy. A necessary read for every budding central banker.”—Raghuram G. Rajan, Professor, University of Chicago Booth School of Business; former Governor of the Reserve Bank of India
“Successful monetary policy requires judgment beyond economics. Kristin J. Forbes masterfully shows how timeless principles of military strategy can effectively guide central banking. A compelling and original contribution for all entrusted with safeguarding monetary stability.”
