The Idea of Central Bank Independence

  • Ranajoy Ray Chaudhuri


Advocates of central bank independence seek to insulate the institution from political pressure while making decisions regarding the interest rate and other monetary policy tools. Critics of central bank independence point to monetary authorities not being accountable to the legislative or executive branches, unconventional monetary policy tools that were meant to be temporary becoming semi-permanent, and winners and losers being created in the course of keeping interest rates low. In practice, the degree of central bank independence varies widely with respect to political autonomy, economic autonomy, financial autonomy and legal autonomy.


  1. Barro, R., & Gordon, D. (1983). A Positive Theory of Monetary Policy in a Natural Rate Model. Journal of Political Economy, 91, 589–610.CrossRefGoogle Scholar
  2. Cukierman, A., Miller, G. P., & Neyapti, B. (2002). Central Bank Reform, Liberalization and Inflation in Transition Economies—An International Perspective. Journal of Monetary Economics, 49(2), 237–264.CrossRefGoogle Scholar
  3. Cukierman, A., Webb, S. B., & Neyapti, B. (1992). Measuring the Independence of Central Banks and Its Effect on Policy Outcomes. The World Bank Economic Review, 6(3), 353–398.CrossRefGoogle Scholar
  4. Dincer, N. N., & Eichengreen, B. (2014). Central Bank Transparency and Independence: Updates and New Measures. International Journal of Central Banking, 10(1), 189–259.Google Scholar
  5. Grilli, V., Masciandaro, D., & Tabellini, G. (1991). Political and Monetary Institutions and Public Financial Policies in the Industrial Countries. Economic Policy, 6(13), 342–392.CrossRefGoogle Scholar
  6. Jácome, L. I., & Vázquez, F. (2008). Is There Any Link Between Legal Central Bank Independence and Inflation? Evidence from Latin America and the Caribbean. European Journal of Political Economy, 24(4), 788–801.CrossRefGoogle Scholar
  7. Kydland, F., & Prescott, E. (1977). Rules Rather Than Discretion: The Inconsistency of the Optimal Plans. Journal of Political Economy, 85, 473–491.CrossRefGoogle Scholar
  8. Lybek, T. (1998). Elements of Central Bank: Autonomy and Accountability, Monetary and Exchange Affairs Department OP/98/1. Washington, DC: International Monetary Fund.Google Scholar
  9. Rogoff, K. (1985). The Optimal Degree of Commitment to an Intermediate Monetary Target. The Quarterly Journal of Economics, 100(4), 1169–1189.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Ranajoy Ray Chaudhuri
    • 1
  1. 1.Muhlenberg CollegeAllentownUSA

Personalised recommendations