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The Liquidity Trap, Democracy and Central Bank Independence

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  • Croitoru Lucian

    (National Bank of Romania Bucharest, Romania)

Abstract

In the wake of the financial crisis, central banks in developed countries performed unconventional operations that are fiscal in nature. On one hand, we support the view that such operations, which are not fully democratic, might lead to loss of central bank operational independence and discuss some difficulties that central banks might face when reversing quantitative easing. On the other hand, we show that, in the middle of a financial crisis, such operations are best performed by central banks. To avoid this potential conflict, the society needs to identify the best means by which the responsibility for quasi-fiscal operations implemented by the central bank is transferred to a democratic structure

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  • Croitoru Lucian, 2014. "The Liquidity Trap, Democracy and Central Bank Independence," Scientific Annals of Economics and Business, Sciendo, vol. 61(1), pages 1-14, July.
    • Handle: RePEc:vrs:aicuec:v:61:y:2014:i:1:p:14:n:2
    DOI: 10.2478/aicue-2014-0002
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    Cited by:

    1. Bostan Ionel, 2014. "Juridical Tools of Governmental Nature Used to Mitigate Various Difficulties of the Financial and Budgetary System," Scientific Annals of Economics and Business, Sciendo, vol. 61(2), pages 133-148, December.

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