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

Hartwell, C. A., 2018. On the impossibility of central bank independence: four decades of time- (and intellectual) inconsistency. Cambridge Journal of Economics. (In Press)

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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:Faculty of Management
ID Code:30487
Deposited By: Unnamed user with email symplectic@symplectic
Deposited On:15 Mar 2018 14:15
Last Modified:15 Mar 2018 14:51

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