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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Author
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Document Date
2021/11/30
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Document Type
Brief
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Report Number
166500
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2021/11/30
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Disclosure Status
Disclosed
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Doc Name
Why Central Bank Independence Matters
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Keywords
central bank independence; monetary policy; independent central bank; dynamic panel model; supervision of bank; high public debt; laws and statute; panel data analysis; central bank law; degree of independence; degree of commitment; intermediate monetary target; central bank for; trade and investment; negative relationship; turnover rate; legal measure
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Citation
Bandaogo,Mahama Abdel Samir Sidbewende
Why Central Bank Independence Matters (English). Research & Policy Briefs,no. 53 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/284641638334557462/Why-Central-Bank-Independence-Matters