Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future

Alex Cukierman

No 6441, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This is an extensive survey of worldwide developments in the area of monetary policymaking institutions during the second half of the twentieth century and beyond. In addition the last section discusses current open issues and future challenges. Section 2 reviews the changes that have occurred in the area of central bank independence (CBI) during the last twenty years, discusses reasons for those developments and provides an overview of accumulated empirical evidence on the relation between CBI and the performance of the economy. Section 3 discusses lessons from stabilization of inflation, reviews the evidence and implications of asymmetric central bank objectives and considers the issue of CBI within the broader context of choosing a nominal anchor. Section 4 reviews the impact of effective conservativeness (or independence) on economic performance in the presence of labour unions. A main insight is that, in the presence of large wage setters, CBI affects real variables like the rate of unemployment implying that conservativeness affects economic performance even in the long run. Section 5 considers future challenges facing modern central banks. The discussion presumes that CBI and price stability are here to stay and focuses on issues relating to the conduct of monetary policy by independent central banks in an era of price stability. The section discusses the risks associated with flexible inflation targeting, issues of accountability and transparency and the impact of central bank capital and finances on its independence.

Keywords: Central bank independence; Economic performance; Monetary institutions and future challenges; Nominal anchors (search for similar items in EconPapers)
JEL-codes: E31 E50 E52 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Central bank independence and monetary policymaking institutions -- Past, present and future (2008)
Journal Article: Central Bank Independence and Monetary Policy Making Institutions: Past, Present, and Future (2006)
Working Paper: Central Bank Independence and Monetary Policymaking Institutions: Past, Present, and Future (2006)
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