THE NATURAL PRICE OF MONEY MAKES THE INDEPENDENCE OF CENTRAL BANKS OBSOLETE

Ion Pohoata, Delia-Elena Diaconasu and Ioana Negru
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Ion Pohoata: Alexandru Ioan Cuza University of Iasi
Delia-Elena Diaconasu: Alexandru Ioan Cuza University of Iasi
Ioana Negru: Lucian Blaga University of Sibiu

Revista Economica, 2024, vol. 76, issue 3, 63-70

Abstract: Relying on the theoretical meaning and the normative value of the natural rate of interest, as inherited from the founders of the economic science, this article aims to demonstrate that the independence of central banks can only be a technical one - one of "dentists", as Keynes would say. To prove our thesis, we set out to build our analysis onto three directions. First, we identify arguments to show that excessive independence, by means of the ‘new classical economics', is not sustainable. Then, we show how the natural rate of interest renders the central bank more disciplined and shapes its independence only within technical boundaries. And thirdly, we show how the attempts to preserve its extended independence by keeping some features of the natural rate remain tentative.

Keywords: natural rate of interest; central bank independence; monetary policy (search for similar items in EconPapers)
JEL-codes: B12 B13 E4 E5 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:blg:reveco:v:76:y:2024:i:3:p:63-70

DOI: 10.56043/reveco-2024-0025

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