Central bank independence from banks rather than governments

Sergio Rossi

Chapter 16 in The Future of Central Banking, 2022, pp 360-372 from Edward Elgar Publishing

Abstract: Central bank independence has become a dogma within the mainstream in economics. Yet, it concerns independence from the general government sector, ignoring that, in fact, central banks are dependent on banks' decisions, particularly when the latter put financial stability at stake. The first section recalls the alleged reasons for making central banks independent from the Treasury. The second section explains that banks have captured central banks, as a result of financialization, which has made the latter serve the interests of the former, rather than making sure the banking sector contributes to the general interest of the economy as a whole. The third section puts forward a monetary-structural reform proposal, to make sure banks' behaviour cannot originate a systemic crisis analogous to that of 2008 at global level and whose negative consequences are still ravaging the world economy.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
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