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The limits of `independence' and the policy of the ECB^

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  • James Forder

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Abstract

It is argued that the European Central Bank's independence is not as secure as it seems and that as a result it has appreciable institutional incentives to protect and enhance its position. It follows that its behaviour should not be understood as being solely determined by the pursuit of price stability. One consequence is that certain points on which it has been criticised on the basis that its approach makes for ineffective monetary policy might be better understood as, often effective, attempts to protect its position. Another is that making a central bank (or any other institution) “completely independent'' may be much harder than it seems, and failed attempts, which come close, are not necessarily to be preferred, even by the advocates of independence, to less ambitious designs. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • James Forder, 2005. "The limits of `independence' and the policy of the ECB^," Public Choice, Springer, vol. 125(3), pages 431-444, December.
  • Handle: RePEc:kap:pubcho:v:125:y:2005:i:3:p:431-444
    DOI: 10.1007/s11127-005-3057-8
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    File URL: http://hdl.handle.net/10.1007/s11127-005-3057-8
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    References listed on IDEAS

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    1. Pierce, James L., 1978. "The myth of congressional supervision of monetary policy," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 363-370, April.
    2. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521783248, May.
    3. Willem H. Buiter, 1999. "Alice in Euroland," Journal of Common Market Studies, Wiley Blackwell, vol. 37(2), pages 181-209, June.
    4. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting EMU's Stability Pact: A Pragmatic Way Forward," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 100-111.
    5. Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters,in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274 National Bureau of Economic Research, Inc.
    6. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-398, September.
    7. Kane, Edward J., 1980. "Politics and Fed policymaking : The more things change the more they remain the same," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 199-211, April.
    8. Dorothee Heisenberg, 2003. "Cutting the Bank Down to Size: Efficient and Legitimate Decision-making in the European Central Bank After Enlargement," Journal of Common Market Studies, Wiley Blackwell, vol. 41(3), pages 397-420, June.
    9. Grier, Kevin B., 1991. "Congressional influence on U.S. monetary policy : An empirical test," Journal of Monetary Economics, Elsevier, vol. 28(2), pages 201-220, October.
    10. John Chant & Keith Acheson, 1972. "The choice of monetary instruments and the theory of bureaucracy," Public Choice, Springer, vol. 12(1), pages 13-33, March.
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    Cited by:

    1. Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," Jena Economic Research Papers 2007-002, Friedrich-Schiller-University Jena.

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