Why Central Bank Independence Matters
Deep economic crises - the global financial crisis and the Coronavirus disease 2019 (COVID-19) pandemic - have put some strains on and rekindled an older debate about the costs and benefits of central bank Independence. Central banks have been acco...
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| Format: | Brief |
| Language: | English |
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World Bank, Malaysia
2021
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| Online Access: | http://documents.worldbank.org/curated/undefined/284641638334557462/Why-Central-Bank-Independence-Matters http://hdl.handle.net/10986/36672 |
| Summary: | Deep economic crises - the global
financial crisis and the Coronavirus disease 2019 (COVID-19)
pandemic - have put some strains on and rekindled an older
debate about the costs and benefits of central bank
Independence. Central banks have been accorded more
independence since the 1970s, which has helped bring down
and keep inflation low and reduced the risk of fiscal
crises. However, as their interventions in the economy with
unconventional policies expand further beyond their original
mandate, especially those pertaining to financial stability,
critics have called for more oversight of their activities.
That is because some of the central banks’ newfound
responsibilities such as financial stability does not have a
precise and unambiguous target or measure, making
accountability difficult. The evidence in support of central
bank independence remains strong, as highlighted in this
brief. However, in light of the expansion of central banks’
power, reforms should aim to institute oversight of the
newfound powers. |
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