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Central Bank Independence - Economic and Political Dimensions

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  • Issing, Ottmar

Abstract

This article reviews the empirical evidence and theoretical arguments for central bank independence, including political economy considerations. It concludes that the optimal institutional framework to keep inflation lastingly under control is based on granting independence to central banks and establishing price stability as the overriding objective of monetary policy. This framework — combined with appropriate appointment procedures, a sound governance structure and a well-defined monetary policy strategy of the central bank — would ensure price stability. Finally, public support for central bank independence also matters. In this respect, the central bank has a special role in nurturing a stability-oriented culture in society.

Suggested Citation

  • Issing, Ottmar, 2006. "Central Bank Independence - Economic and Political Dimensions," National Institute Economic Review, National Institute of Economic and Social Research, vol. 196, pages 66-76, April.
    • Handle: RePEc:cup:nierev:v:196:y:2006:i::p:66-76_8
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