 Central Bank Independence, Democracy, and DollarizationAllan Drazen Journal of Applied Economics, 2002, vol. 5, issue 1, 1-17 Abstract: Is there a fundamental conflict between insulating monetary policy from popular pressures, seen as essential to sound monetary policy, and making policy responsive to the popular will, seen as fundamental to democracy? We argue that strongly independent monetary policy is not inconsistent with democratic control of policymaking, once one realizes that a key feature of democratic policymaking is the decision to remove some decisions from “day-to-day” political pressures. This is the essence of “constitutionalism,” central to the functioning of democracy, by which certain decisions are made difficult to reverse. It is further argued that a conflict between popular sovereignty and policymaker independence is not unique to monetary policy, but actually characterizes most policymaking in a democracy, with institutions designed to insulate policymaking from popular pressures. A constitutional perspective implies that extreme forms of commitment, such as a dollarization, are similarly consistent with democracy. One argument for such constraints on monetary policy (as opposed to fiscal policy, for example) is agreement on what good monetary policy means. Date: 2002 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:recsxx:v:5:y:2002:i:1:p:1-17 Ordering information: This journal article can be ordered from DOI: 10.1080/15140326.2002.12040569 Access Statistics for this article Journal of Applied Economics is currently edited by Jorge M. Streb More articles in Journal of Applied Economics from Taylor & Francis Journals |
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