The Three Pillars of Central Bank Governance -Towards a Model Central Bank Law or a Code of Good Governance? 1 (original) (raw)
Related papers
2004
The International Monetary Fund (IMF) supports central bank autonomy and accountability, since it facilitates price and financial sector stability, which are conducive to sustainable economic growth. In the literature, autonomy is sometimes preferred to the frequently used term independence, as autonomy entails operational freedom, while independence indicates a lack of institutional constraints. A central bank must have clearly defined and prioritized objectives, sufficient authority to achieve these objectives and be autonomous to remain credible. At the same time, it must be accountable for the authority delegated to it to ensure checks and balances. Reforming the legislative framework for a central bank—often after a crisis—can help boost the credibility of monetary policy. This reduces the perceived inflation bias and thus the real interest rate, which advances sustainable economic growth. However, a consistent reform of the legislative framework must be supported by commitment...
2004
This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper identifies issues to consider when designing the structure, size, and composition of the governing boards and management of a central bank. While central bank autonomy and accountability are generally accepted as good practice, there is less consensus regarding the structure, size, and composition of the governing bodies. This paper surveys 101 central bank laws covering 113 countries and classifies the governance structure according to degree of autonomy, functions performed, size, composition, appointment procedures, and terms of the members. The paper concludes that an appropriate balance must be struck between the functions of the governing entities, simplicity, and country specific factors. The functions of the various bodies follow logically if a greater appreciation exists for the type of autonomy delegated to the central bank.
Central Bank Independence and Financial Stability: Orthodox and heterodox approaches
This study argues that post-crisis discussions on central bank independence are less about a choice of a level of independence but more about a relation between the independence and the central bank mandate in financial stability. An offered hypothesis states that an increasing role of financial factors in the macroeconomic policy agenda has led to emerging of two approaches to the central bank independence. Within the orthodox approach, responsibility for the financial stability is a challenge to the accepted model: one mandate – one goal – one instrument. Interference into the financial cycle impairs transparency and distorts responsibility, while deflation bias risks get in conflict with price stability principles, adherence to which is exactly what central banks are granted independence for. In terms of the heterodox approach, a wider responsibility of central banks for financial stability requires more independence to protect the legitimacy of interference into the financial cycle and implementation of a more prudent regulatory regime. Orthodox view is contradictory in its nature, while the vulnerability of the second approach lies in quality of institutional environment. Price stability mandate is argued to remain the first priority, while the financial stability issues should be institutionalized in a clearer way to secure independence. І. IntroductIon new macroeconomic phenomena and financial turbulence after the global crisis have long been calling for concentration of researchers' attention to the role of central banks in the "new" context. at the moment, the established "new normal" phenomenon following the rethinking macroeconomic policy leaves the question open on a desirable institutional functioning of monetary authorities. Implementation of nonconventional monetary policy programs has had an impact on changes in its operational design which resulted in further actualization of question how new features of central banks' operation and environment correlate with the central bank status. at the same time, post-crisis developments in central banking and emergence of new responsibilities only emphasize that traditional challenges do not go away but instead are reinforced with the new ones. In post-crisis reality discussions on central bank independence become more pronounced, with financial stability being their integral expression. the problem of defining a role of central bank independence in the area of financial stability is attributed, to a large extent, to the fact that achievements of price stability and financial stability are not always the same thing. deficiency of the quantitative basis for the latter, lack of tool-kits for achievement of predictable results, discrepancies in the policies are only a few items on the long list of their differences. despite huge differences between the substance of the two, however, they still have a wide range of issues in common. among those common grounds are, in particular, the problems of political pressure, dynamic inconsistency, and quality of institutions. ■ The article is a translation of the original article in Ukrainian. In case of any discrepancies between the original article and its translation to English, the Ukrainian version of the article should prevail.
Determinants of Central Bank Independence and Governance: Problems and Policy Implications
2000
Central bank independence and governance (CBIG) is a term subject to conflicting definitions and so its related studies are difficult to compare. This paper therefore focuses on developing of a more useable definition, and an index model identifying the determinants of independence and governance and their possible policy implications. It also examines various independence measurement tools such as ranking and
The Independence of the European Central Bank: Implications for Democratic Governance
Teivo Teivainen: “The Independence of the European Central Bank: Implications for Democratic Governance”, in Politics of Economic and Monetary Union. Petri Minkkinen and Heikki Patomäki (eds.). Kluwer Academic Publishers, Dortrecht 1997, pp. 54-74., 1997
Arguments for and against Central Bank Independence, assessed in the context of the European Central Bank. Emphasis on implications for democracy. The article was written before the ECB started operating, but some of its arguments may have more relevance today than when it was written.
Challenges for Central Banks Governance in the Context of a Deeper Economic and Monetary Union
Procedia Economics and Finance, 2015
The paper examines some of the challenges posed for the central bank governance model in the new unorthodox normality. While significant progress has been made debating conventional ideas about central bank orthodoxy, issue like institutional adaptation of central bank governance modelto better face the new reality is still subject to consideration. Can adaptation improve the overall quality of the governance model? This article suggests first, that adaptation calls forrebalancingkey functions without leaving aside two of much-prized features achieved in pre-crisis era of conventional consensus: maintaining price stability and independence; second, that adaptation requires innovation to prevent the governance model disruption and to boost public perception of the central bank.
Central Bank Governance: A Survey of Boards and Management
IMF Working Papers, 2004
This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper identifies issues to consider when designing the structure, size, and composition of the governing boards and management of a central bank. While central bank autonomy and accountability are generally accepted as good practice, there is less consensus regarding the structure, size, and composition of the governing bodies. This paper surveys 101 central bank laws covering 113 countries and classifies the governance structure according to degree of autonomy, functions performed, size, composition, appointment procedures, and terms of the members. The paper concludes that an appropriate balance must be struck between the functions of the governing entities, simplicity, and country specific factors. The functions of the various bodies follow logically if a greater appreciation exists for the type of autonomy delegated to the central bank.