De Economist

, Volume 146, Issue 2, pp 199–226 | Cite as

Central Banking in a Democratic Society

  • Joseph Stiglitz


This Tinbergen lecture addresses two issues. The first concerns the principles of monetary policy in a low-inflation environment. The second, more fundamental, issue concerns the institutional arrangements by which monetary policy is set in a democratic society. Three conclusions are drawn: (1) Monetary policy matters. Despite some major mistakes, American postwar economic policy has led to far greater stability of the economy. (2) Strategies of opportunistic disinflation or pre-emptive strikes are based on hypotheses for which there is little empirical support. An alternative strategy, called cautious expansionism, would be preferable. (3) A central bank must be accountable and sensitive to democratic processes; there must be more democracy in the choice of decision makers and more representativeness in the governance structure.

monetary policy central bank independence 


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© Kluwer Academic Publishers 1998

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  • Joseph Stiglitz

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