Real Central Bank Independence in the Post-Crisis Period or Myth

The realization of the goal of price stability, the central bank, according to the accepted consensus before the crisis, should have complete independence in decisionmaking. The possibility of full independence of the central bank has raised many controversies. The main argument of complete independence was to establish a central bank authorities according to law. This allows them to impose duties, responsibilities and define the mandate and thus directly or discreetly affect its operation. The latest crisis has shown that the central bank from political pressures have taken a number of non-standard measures in alleviating and limiting the crisis. Sovereign debt crisis in the EU has more impact on the independence of the central bank. Therefore, central banks have to immediately normalize its business back into the legally defined boundaries and achieving its main objectives. Long-term monetary “hospitalization” may undermine the credibility and independence of the central bank. Therefore, they should be independent from the legislative and executive branches.