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The independence of central banks: a reductio ad absurdum

Author

Listed:
  • Ion Pohoață

    (UAIC - Alexandru Ioan Cuza University of Iași = Universitatea Alexandru Ioan Cuza din Iași)

  • Delia-Elena Diaconașu

    (UAIC - Alexandru Ioan Cuza University of Iași = Universitatea Alexandru Ioan Cuza din Iași)

  • Ioana Negru

    (ULBS - "Lucian Blaga" University)

Abstract

This paper testifies to the fact that the proclaimed independence of central banks, as conceived by its founders, is nothing more than a chimera. We demonstrate that the hypothesis ‘inflation is a purely monetary phenomenon' does not substantiate the case for independence. Further, the portrayal of the conservative central banker, the imaginary principal-agent contract, the alleged financial autonomy, along with the ban on budgetary financing, amount to flawed logic in arguing for the independence of the central bank. We also highlight that the idea of independence is not convincing due to the absence of well-defined outlines in its operational toolbox and the system of rules it relies upon.

Suggested Citation

  • Ion Pohoață & Delia-Elena Diaconașu & Ioana Negru, 2024. "The independence of central banks: a reductio ad absurdum," Post-Print hal-04183244, HAL.
    • Handle: RePEc:hal:journl:hal-04183244
    DOI: 10.46298/jpe.12256
    Note: View the original document on HAL open archive server: https://hal.science/hal-04183244v2
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    References listed on IDEAS

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    Keywords

    inflation; conservative banker; Principal-Agent contract; financial autonomy; budgetary financing;
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