The Elusive Promise of Independent Central Banking
AbstractIndependent central banking is reviewed as it emerged first under the gold standard and later with an 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 InfoPaper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 12-E-09.
Date of creation: Sep 2012
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Bank of England; central bank independence; credit turmoil of 2007-8; Federal Reserve; Great Inflation; lender of last resort; monetary policy;
Other versions of this item:
- Marvin Goodfriend, 2012. "The Elusive Promise of Independent Central Banking," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 30, pages 39-54, November.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-BAN-2012-09-30 (Banking)
- NEP-CBA-2012-09-30 (Central Banking)
- NEP-HIS-2012-09-30 (Business, Economic & Financial History)
- NEP-MAC-2012-09-30 (Macroeconomics)
- NEP-MON-2012-09-30 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The vanishing independence of central banks
by Economic Logician in Economic Logic on 2012-11-01 14:44:00
- Otmar Issing, 2013. "A New Paradigm for Monetary Policy?," International Finance, Wiley Blackwell, vol. 16(2), pages 273-288, 06.
- 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.
- 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," NBER Working Papers 18828, National Bureau of Economic Research, Inc.
- Issing, Otmar, 2013. "A new paradigm for monetary policy?," CFS Working Paper Series 2013/02, Center for Financial Studies (CFS).
- Issing, Otmar, 2013. "Challenges for monetary policy," SAFE White Paper Series 7, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
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