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Independence of the central bank: Too much power in the hands of unelected technocrats?

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  • Issing, Otmar

Abstract

Under the overwhelming evidence of numerous empirical studies that found a negative correlation between the degree of independence and the level of inflation, many governments granted their national central banks independent status around 1990. With low inflation rates in the subsequent period - with the notable exception of the sharp price increases after 2020 - monetary policy largely confirmed the empirical findings. Consequently, one might expect that independence is now considered an undisputed element of sound central bank governance. However, this is by no means the case.

Suggested Citation

  • Issing, Otmar, 2026. "Independence of the central bank: Too much power in the hands of unelected technocrats?," IMFS Working Paper Series 240, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    • Handle: RePEc:zbw:imfswp:340021
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    3. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44(1), pages 1-1.
    4. Otmar Issing, 2017. "Central banks—are their reputations and independence under threat from overburdening?," International Finance, Wiley Blackwell, vol. 20(1), pages 92-99, March.
    5. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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