Central Bank independence and monetary discipline: skeptical observations

Abstract

Orthodox conventional wisdom related to monetary policy in the 1990s presents
the independence of central banks as a condition for achieving durable price stability, as it did
with respect to the adoption of fixed rules for monetary growth in the 1980s. The paper proceeds
to a critical examination of the arguments, in which it is concluded that, besides the undesirable
political implications of the proposal, the thesis is too dependent on specious and fragile
concepts as the natural rate of unemployment and the allegedly inherent inflationary bias
of monetary authorities as well as on a very narrow view of the role of monetary authorities.

JEL Classification: E58; E52.