Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56966
Authors: 
Bibow, Jörg
Year of Publication: 
2010
Series/Report no.: 
Working paper, Levy Economics Institute 625
Abstract: 
This paper critically assesses the rise of central bank independence (CBI) as an apparent success story in modern monetary economics. As to the observed rise in CBI since the late 1980s, we single out the role of peculiar German traditions in spreading CBI across continental Europe, while its global spread may be largely attributable to the rise of neoliberalism. As to the empirical evidence alleged to support CBI, we are struck by the nonexistence of any compelling evidence for such a case. The theoretical support for CBI ostensibly provided by modeling exercises on the so-called time-inconsistency problem in monetary policy is found equally wanting. Ironically, New Classical modelers promoting the idea of maximum CBI unwittingly reinstalled a (New Classical) 'benevolent dictator' fiction in disguise. Post Keynesian critiques of CBI focus on the money neutrality postulate as well as potential conflicts between CBI and fundamental democratic values. John Maynard Keynes's own contributions on the issue of CBI are found worth revisiting.
Subjects: 
central banks
central bank independence
democratic accountability
monetary policy
time-inconsistency
JEL: 
B31
B59
E02
E50
E61
Document Type: 
Working Paper

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