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Independence and Accountability

Author

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  • Clive Briault
  • Andrew Haldane
  • Mervyn King

Abstract

Why have central banks become more accountable and transparent in recent years? This paper considers a set of analytical models of monetary policy institutions to shed light on this. One conclusion it reaches is that uncertainty - regarding the central bank's inflation preferences or about the underlying model of the world - can generate inflationary problems which transparency can help counteract. This offers one rationale for the current monetary policy framework in the UK. The paper also constructs a quantitative index of accountability. This suggests that transparency has been pursued most actively by central banks with little independence and a low accrued stock of credibility. Again, this chimes with UK experience. A shorter version of this paper is forthcoming in "Toward more effective Monetary Policy" - proceedings of the Seventh Internal Conference sponsored by the Bank of Japan's Institute for Monetary and Economic Studies.

Suggested Citation

  • Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
  • Handle: RePEc:boe:boeewp:49
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1996/wp49.pdf
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    References listed on IDEAS

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    1. Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-1144, September.
    2. Francis Breedon & Ian Twinn, 1995. "Valuation of underwriting agreements for UK rights issues: evidence from the traded option market," Bank of England working papers 39, Bank of England.
    3. Andy Haldane & Bennett McCallum & Chris Salmon, 1996. "Base Money Rules in the UK," Bank of England working papers 45, Bank of England.
    4. Aizenman, Joshua & Frenkel, Jacob A, 1985. "Optimal Wage Indexation, Foreign Exchange Intervention, and Monetary Policy," American Economic Review, American Economic Association, vol. 75(3), pages 402-423, June.
    5. Roger Beaton & Paul Fisher, 1995. "The Construction of RPIY," Bank of England working papers 28, Bank of England.
    6. Dotsey, Michael, 1987. "Monetary policy, secrecy, and federal funds rate behavior," Journal of Monetary Economics, Elsevier, vol. 20(3), pages 463-474, December.
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