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Central Bank Policy — Goals and Reality

In: Money and Banking

Author

Listed:
  • Otmar Issing

Abstract

In Germany there is a particularly strong desire for a stable price level because of past experience of hyperinflation. Moreover, a low German inflation rate is of major significance for the European Monetary System. The central bank’s responsibility for fighting inflation and the limits to this responsibility depend on its position in the overall political system and on the policy instruments available to it. As economic theory fails to provide clear instructions on action in many situations calling for monetary policy decisions, monetary policy has considerable latitude in practice. The ‘stability culture’ of a society and the credibility of the central bank play a major part in determining the extent to which this latitude can be exploited for the implementation of an anti-inflationary central bank policy, even when the going gets tough.

Suggested Citation

  • Otmar Issing, 1993. "Central Bank Policy — Goals and Reality," Palgrave Macmillan Books, in: Philip Arestis (ed.), Money and Banking, chapter 4, pages 41-54, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-13319-2_4
    DOI: 10.1007/978-1-349-13319-2_4
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