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The Elusive Promise of Independent Central Banking

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  • Marvin Goodfriend

    (Carnegie Mellon University)

Abstract

Independent central banking is reviewed as it emerged first under the gold standard and later with inconvertible paper money. Monetary and credit policy are compared and contrasted as practiced by the 19th century Bank of England and the Federal Reserve. The lesson is that wide operational and financial independence given to monetary and credit policy in the public interest subjects the central bank to incentives detrimental for macroeconomic and financial stability. An independent central bank needs the double discipline of a priority for price stability and bounds on expansive credit initiatives to secure its promise for stabilization policy.

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Bibliographic Info

Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 30 (2012)
Issue (Month): (November)
Pages: 39-54

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Handle: RePEc:ime:imemes:v:30:y:2012:p:39-54

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Related research

Keywords: Bank of England; Central bank independence; Credit turmoil of 2007-08; Federal Reserve; Great Inflation; Lender of last resort; Monetary policy;

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  1. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, December.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The vanishing independence of central banks
    by Economic Logician in Economic Logic on 2012-11-01 14:44:00
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Cited by:
  1. Michael D. Bordo & Hugh Rockoff, 2013. "Not Just the Great Contraction: Friedman and Schwartz's A Monetary History of the United States 1867 to 1960," American Economic Review, American Economic Association, vol. 103(3), pages 61-65, May.
  2. Issing, Otmar, 2013. "Challenges for monetary policy," SAFE White Paper Series 7, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  3. Otmar Issing, 2013. "A New Paradigm for Monetary Policy?," International Finance, Wiley Blackwell, vol. 16(2), pages 273-288, 06.
  4. Issing, Otmar, 2013. "A new paradigm for monetary policy?," CFS Working Paper Series 2013/02, Center for Financial Studies (CFS).

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