Independent Central Banks: Some theoretical and empirical problems?

Peter Howells ()
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Peter Howells: UWE, Bristol

No 908, Working Papers from Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol

Abstract: In little more than twenty years, it has become widely accepted that the optimal design of monetary policy should include provision for a central bank that is independent of government influence. This is a remarkably short period of time for any idea in economics to become so widely-accepted. But there are problems. In this paper we show that there are many confusions and even some contradictions associated with central bank independence. To begin with, it is not entirely clear what it is exactly that central banks need to be independent of. Furthermore, there is confusion over the mechanisms whereby independence is supposed to deliver its benefits. The literature which is commonly said to provide the rationale for independence is often misunderstood and the evidence that independence does in fact enhance policy outcomes is extremely weak.

Keywords: independent; central; banks (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009-06
New Economics Papers: this item is included in nep-cba, nep-hpe, nep-mac, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uwe:wpaper:0908

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