Skip to main content

On the impossibility of central bank independence: four decades of time- (and intellectual) inconsistency.

Hartwell, C. A., 2019. On the impossibility of central bank independence: four decades of time- (and intellectual) inconsistency. Cambridge Journal of Economics, 43 (1), 61-84.

Full text available as:

[img]
Preview
PDF (This is a pre-copyedited, author-produced version of an article accepted for publication in Cambridge Journal of Economics following peer review.)
CJECBIFinal2003.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

679kB

DOI: 10.1093/cje/bex083

Abstract

The intellectual justification for modern central banking, time-inconsistency, celebrated its fortieth anniversary in 2017 alongside the Cambridge Journal of Economics. However, the key progeny of the time-inconsistency literature, central bank independence, has fundamental flaws that have been thus far neglected in mainstream research. In the first instance, the argument for independence relies on a utilitarian rather than institutional analysis, one that neglects the genesis of central banks and their relation to other institutions within a country. Second, central bank independence neglects the complex interdependencies of the global monetary and financial system. Applying an institutional lens to the concept of central bank independence, I conclude that ‘independence’ fails under the reality of globalization as much as it does in a domestic context. With central banks reliant on all manner of political institutions, they are never really independent operationally or in terms of policy.

Item Type:Article
ISSN:0309-166X
Uncontrolled Keywords:Central bank independence; time-inconsistency; institutions; inflation
Group:Bournemouth University Business School
ID Code:30487
Deposited By: Symplectic RT2
Deposited On:15 Mar 2018 14:15
Last Modified:14 Mar 2022 14:10

Downloads

Downloads per month over past year

More statistics for this item...
Repository Staff Only -