Independence of the central bank ( Eng. Central bank independence ) - in the economic literature, the institutional characteristic of the central bank , describing the degree of freedom from direct political or government influence in the conduct of monetary policy [1] .
There is no unified definition of central bank independence in the economic literature. It is defined as the ability of the central bank to independently apply monetary policy instruments [2] . As a characteristic of the rules limiting the influence of the government on the monetary policy of the central bank [3] . As the delegation of authority and responsibility for monetary policy to non-elected officials on whom the government may have limited influence [4] .
Classification of Central Bank Independence Forms
The economist Vittorio Grilli (Minister of Economy of Italy in 2012–13), together with co-authors, in 1991 proposed the concepts of political independence of the central bank ( English political independence ) and its economic independence ( English economic independence ). In the original work, they define political independence as the ability of the central bank to choose the ultimate goal of monetary policy, such as inflation or the level of economic activity [5] . It depends on the appointment of the central bank management, the nature of the relationship between the central bank and the government, as well as the formal responsibility (mandate) of the central bank. In their understanding, economic independence is the ability of the central bank to choose tools to achieve its goals. It is determined by the degree of influence of the government on its borrowings (through loans or the purchase of government securities) from the central bank and the nature of the instruments managed by the central bank. If the government can determine the volume and conditions under which it attracts loans from the central bank, it affects the creation of a monetary base and reduces the economic independence of the central bank.
A similar simple classification of the forms of independence of the central bank was proposed by Stanley Fisher (chairman of the Bank of Israel in 2005-2013 and vice chairman of the US Federal Reserve in 2014-2017) and Guy Debell (future deputy chairman of the Reserve Bank of Australia ) in 1994. They described two forms of independence of monetary authorities. The first was the independence of the goal of the activity of a public institution ( English goal independence ), which implies that the central bank has a goal different from the goal of the fiscal authorities. The second is the independence of the instrument of economic policy ( Eng. Instrument independence ), which means that the monetary authorities must have independent, that is, their own tools to achieve their goal [6] .
IMF Senior Economist Tonni Lybek expanded their definition, including independence of monetary policy objectives, operational independence and independence of monetary instruments [7] . The independence of monetary policy objectives is an independent statement by the central bank of its ultimate goal. Operational independence (or independence in the choice of monetary policy target variables ) means that the central bank independently selects a list of intermediate and operational goals that will be used to achieve the ultimate goal of monetary policy. Monetary independence or instrumental independence implies freedom of choice and application of monetary policy instruments.
See also
- Bank of Russia
- Money-credit policy
- Monetary authorities
- Confidence in monetary policy
- central bank
Notes
- ↑ Walsh C. Central bank independence. - The New Palgrave Dictionary of Economics. - London: Palgrave Macmillan, 2018 .-- S. 1467. - ISBN 978-1-349-95188-8 .
- ↑ Bernhard W. Banking on Reform. Political Parties and Central Bank Independence in the Industrial Democracies. - Michigan: University of Michigan Press, 2002 .-- S. 21.
- ↑ Garriga A. Central Bank Independence in the World: A New Data Set // International Interactions. - 2016 .-- T. 5 . - S. 849-850 .
- ↑ de Haan J. and Eijffinger S. The Politics of Central Bank Independence // EBC Discussion Paper. - 2016. - No. 4 . - S. 2 .
- ↑ Vittorio Grilli, Donato Masciandaro, Guido Tabellini, Edmond Malinvaud, Marco Pagano. Political and Monetary Institutions and Public Financial Policies in the Industrial Countries // Economic Policy. - 1991. - T. 6 , No. 13 . - S. 342-392 .
- ↑ Fischer S. Modern Central Banking / Capie F., Fischer S., Goodhart C., and Schnadt N. .. - The Future of Central Banking. - Cambridge: Cambridge University Press, 1994. - S. 262-308.
- ↑ Lybek T. Elements of Central Bank: Autonomy and Accountability // IMF Monetary and Exchange Affairs Department Operational Paper. - 1998. - No. 1 .