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Central Bank Independence - Economic and Political Dimensions

Published online by Cambridge University Press:  26 March 2020

Ottmar Issing
Ottmar Issing*
Affiliation:
European Central Bank
*
e-mail: jens.kuhn@ecb.int.
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Abstract

This article reviews the empirical evidence and theoretical arguments for central bank independence, including political economy considerations. It concludes that the optimal institutional framework to keep inflation lastingly under control is based on granting independence to central banks and establishing price stability as the overriding objective of monetary policy. This framework — combined with appropriate appointment procedures, a sound governance structure and a well-defined monetary policy strategy of the central bank — would ensure price stability. Finally, public support for central bank independence also matters. In this respect, the central bank has a special role in nurturing a stability-oriented culture in society.

Keywords

Central bank independencecredibilitymonetary policystability cultureE42E50E58
Type
Articles
Information
National Institute Economic Review , Volume 196 , 01 April 2006 , pp. 66 - 76
Copyright
Copyright © 2006 National Institute of Economic and Social Research

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Footnotes

I would like to thank Wolfgang Modery and Roberto Motto for their valuable contributions.

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