Central Bank Independence
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If you were the president of a small country democratically elected would you support an independent central bank monetary policy or would you prefer to influence it?
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Solution Summary
Monetary policy as the preserve of the government and its goals are discussed in the solution in 506 words with 3 non-APA references.
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In the past, monetary policy was the preserve of the government where its priorities are lower inflation, higher growth, targeting the exchange rate, and balancing of payments. Then, there were arguments for the central bank independence such as the tendency of the government to make poor decisions on monetary policy (can be influenced by political considerations); government is tempted to cut the interest rates before elections; and people have more trust and confidence in the central bank. (Pettinger, 2008)
Central bank independence means being free from the influence and control of the executive and legislative branches of the government (in the United States). There are two types of independence for central banks. One is goal independence or its ability to sent the final goals for monetary policy. If it is free to choose its instruments settings so that it can achieve its ultimate ...
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