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Central Bank Independence in the European Union

In: Towards More Effective Monetary Policy

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  • Franco Bruni

Abstract

The Maastricht Treaty requires the central banks of the countries in the European Union (EU) to become fully “independent” before the start of the third phase of Economic and Monetary Union (EMU) and the creation of the European Central Bank (ECB). The treaty dictates several conditions for a central bank to be considered “independent.” Central bank independence (CBI) is therefore a condition for participating in the EMU, to be considered together with the macroeconomic convergence criteria on inflation, interest and exchange rates and on the governments’ financial deficits and debts. In this sense the relationship between CBI and a credible and permanent commitment to fixed exchange rates is one of complementarity. Fixing exchange rates and unifying currencies requires a common monetary policy. In order to be able to delegate their monetary policies to a supernational agency, the countries must first free their central banks of national political influences.

Suggested Citation

  • Franco Bruni, 1997. "Central Bank Independence in the European Union," Palgrave Macmillan Books, in: Iwao Kuroda (ed.), Towards More Effective Monetary Policy, chapter 11, pages 341-386, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-25382-1_11
    DOI: 10.1007/978-1-349-25382-1_11
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