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The Natural Price Of Money Makes The Independence Of Central Banks Obsolete

Author

Listed:
  • POHOATA Ion

    (Alexandru Ioan Cuza University of Iasi)

  • DIACONASU Delia-Elena

    (Alexandru Ioan Cuza University of Iasi)

  • NEGRU Ioana

    (Lucian Blaga University of Sibiu)

Abstract

Relying on the theoretical meaning and the normative value of the natural rate of interest, as inherited from the founders of the economic science, this article aims to demonstrate that the independence of central banks can only be a technical one - one of "dentists", as Keynes would say. To prove our thesis, we set out to build our analysis onto three directions. First, we identify arguments to show that excessive independence, by means of the ‘new classical economics', is not sustainable. Then, we show how the natural rate of interest renders the central bank more disciplined and shapes its independence only within technical boundaries. And thirdly, we show how the attempts to preserve its extended independence by keeping some features of the natural rate remain tentative.

Suggested Citation

  • POHOATA Ion & DIACONASU Delia-Elena & NEGRU Ioana, 2024. "The Natural Price Of Money Makes The Independence Of Central Banks Obsolete," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 76(3), pages 63-70, September.
    • Handle: RePEc:blg:reveco:v:76:y:2024:i:3:p:63-70
    DOI: 10.56043/reveco-2024-0025
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    References listed on IDEAS

    as
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    5. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-162, May.
    6. Ion Pohoață & Delia-Elena Diaconașu & Ioana Negru, 2024. "The independence of central banks: a reductio ad absurdum," Post-Print hal-04183244, HAL.
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    More about this item

    Keywords

    natural rate of interest; central bank independence; monetary policy;
    All these keywords.

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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