Populism and Central Bank Independence

Charles Goodhart and Rosa Lastra

No 12122, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The consensus that surrounded the granting of central bank independence in the pursuit of a price stability oriented monetary policy has been challenged in the aftermath of the global financial crisis, in the light of the rise of populism on the one hand and the expanded mandates of central banks on the other hand. After considering the economic case for independence and the three Ds (distributional, directional and duration effects), the paper examines three different dimensions in the debate of how the rise in populism - or simply general discontent with the status quo - affects central bank independence. Finally, the paper examines how to interpret the legality of central bank mandates, and whether or not central banks have exceeded their powers. This analysis leads us in turn to consider accountability and, in particular, the judicial review of central bank actions and decisions. It is important to have in place adequate mechanisms to ‘guard the guardians’ of monetary and financial stability.

Keywords: Central bank independence; Populism; Mandates; Accountability; Legitimacy; Judicial review (search for similar items in EconPapers)
JEL-codes: E50 E58 H10 K10 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
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Citations: View citations in EconPapers (15)

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