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The independence of central banks: a reductio ad absurdum

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  • Ion Pohoață; Delia-Elena Diaconașu; Ioana Negru

    (1 Alexandru Ioan Cuza University of Iași, Romania, 2 Alexandru Ioan Cuza University of Iași, 3 "Lucian Blaga" University, Romania)

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," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 1(1), pages 85-118, Annual.
    • Handle: RePEc:bus:jphile:v:17:y:2024:i:1:n:4
    DOI: 10.46298/jpe.12256
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    References listed on IDEAS

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    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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