Alex Cukierman: The Revolution in Monetary Policymaking Institutions

What factors explain the movement toward increased central bank independence over the last twenty years?:

The Revolution in Monetary Policymaking Institutions, by Alex Cukierman, Vox EU: Twenty years ago and earlier, most central banks in the world functioned as departments of ministries of finance. They were expected - by law, custom, or both - to utilise their policy instruments to achieve a myriad of objectives, including high levels of growth and employment, provision of funds to government for the financing of public expenditures and addressing balance-of-payments problems.[1] They also were expected to maintain financial and price stability, but the price stability objective was one among several other objectives in the charter of the Bank and had no particular status. In some cases, like Spain and Norway, it did not even appear in the charter.[2] Paralleling this state of affairs, economic theory did not attribute particular importance to central-bank independence and the concept of credibility of monetary policy was in early stages of development. Furthermore, a notable legacy of the Keynesian revolution was the belief that a certain amount of inflation is conducive to economic growth...more>>