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In this paper, we survey the case for central bank independence (CBI). We conclude that CBI is neither necessary nor sufficient for monetary stability. CBI is just one potentially useful monetary policy design instrument among several, & CBI should not be treated as an exogenous variable. Instead, the question that should be addressed is why societies decide to make their central banks independent? The reasons why CBI is chosen are related to legal, political, & economic systems. A number of empirical studies find correlations between CBI & low inflation rates. Endogeneity of CBI suggests, however, that the correlation has no implications for causality. 106 References. Adapted from the source document.

"Very large balance sheet policies by central banks followed the Great Financial Crisis which along with the associated expanded mandate, eroded the independence of central banks. This book argues for a return to the consensus role for independent central banks"--

The paper discusses recent changes in central bank laws and the relationship between inflation and central bank independence in transition economies. Two indices of legal independence are constructed, covering political and economic aspects of independence. Most of the countries experienced high‐inflation episodes in the recent past and changes introduced to the laws after, or simultaneously, with stabilization programmes strengthened the position of the central banks. In further analysis, an inverse relationship emerges between inflation and indices of central bank independence. However, the robust relationship is present only at a high level of economic liberalization. This conclusion is supported by results from regressions on time‐aggregated and panel data, even after controlling for the government fiscal position and the absence/presence of an IMF stabilization package.

This paper uses results of a questionnaire survey to look at how central bankers in the Czech Republic, Hungary, Poland, & Slovakia view various criteria of central bank independence & compares their responses with central bankers in industrial countries. Central bankers from both groups agree very strongly on the importance of two pillars of central bank independence: goal independence & freedom to implement these goals, together with a system of how credit is granted by a central bank to a government that gives the central bank powers to determine terms & limits the extent of such credit. Based on the responses, the paper also identifies some weaknesses of the most frequently used indices of central bank independence & makes recommendations on how to improve them. 1 Table, 13 References. Adapted from the source document.

Abstract This paper uses results of a questionnaire survey to look at how central bankers inthe Czech Republic, Hungary, Poland and Slovakia view various criteria of centralbank independence and compares their responses with central bankers in industrialcountries. Central bankers from both groups agree very strongly on the importanceof two pillars of central bank independence: goal independence and freedom toimplement these goals, together with a system of how credit is granted by a centralbank to a government that gives the central bank powers to determine terms andlimits the extent of such credit. Based on the responses, the paper also identifiessome weaknesses of the most frequently used indices of central bank independenceand makes recommendations on how to improve them.