Monetary Policy in Turkey after Central Bank Independence

This Economic Commentary explains how warehousing—a seemingly innocuous institutional arrangement between the Federal Reserve and the US Treasury—came to threaten the Fed’s independence. Warehousing began as an arcane procedure designed to help the Treasury cover a specific type of foreign-exchange exposure. It then grew into a supplemental source of funding for the Treasury's foreign-exchange interventions. Eventually the procedure morphed into a sizeable off-budget source of funding for other Treasury activities and seemed an inappropriate subversion of the congressional appropriations process, a development that raised concerns within the Fed about its ability to conduct monetary policy free from political concerns.

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The Risk-Taking Channel of Monetary Policy: Do Macroprudential Regulation and Central Bank Independence Influence the Transmission of Interest Rates?

SSRN Electronic Journal ◽

10.2139/ssrn.3021249 ◽

2017 ◽

Author(s):

Alin Marius Andries ◽

Ioana Plescau

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Interest Rates ◽

Risk Taking ◽

Central Bank Independence ◽

Macroprudential Regulation

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Central Bank Credibility, Independence, and Monetary Policy

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2018-0025 ◽

2018 ◽

Vol 7 (3) ◽

pp. 91-110 ◽

Cited By ~ 2

Author(s):

Abdelkader Aguir

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Emerging Economies ◽

Inflation Targeting ◽

Central Bank Independence ◽

Inflation Target ◽

Central Bank Credibility

Abstract The main motives behind the adoption of an inflation targeting regime largely relate to the notion of credibility, transparency of monetary policy and the autonomy of the central bank, which explicitly undertakes to achieve a certain inflation target. This paper examines the effects of inflation targeting in emerging economies in relation to the degree of independence of the central bank and the credibility of monetary policy. We find effects in emerging economies with little central bank independence, so our findings suggest that the central bank’s credibility, transparency and independence is a prerequisite for emerging economies to experience a decline in inflation following the adoption of inflation targeting.

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The Bank of Japan: Central Bank Independence and the Politicization of Monetary Policy

The Oxford Handbook of Japanese Politics ◽

10.1093/oxfordhb/9780190050993.013.23 ◽

2021 ◽

Author(s):

Gene Park

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Prime Minister ◽

Central Bank Independence ◽

Executive Power ◽

Theoretical Justification ◽

Electoral Incentives ◽

Economic Stagnation ◽

Bank Of Japan ◽

The Government

In April 1998, the Bank of Japan (BOJ) gained legal independence. While the primary theoretical justification was to enhance the central bank’s inflation-fighting credibility, the newly independent BOJ immediately confronted a different and unexpected problem: a long and persistent deflation. As the government battled economic stagnation, debates over the extent to which the BOJ should prioritize overcoming deflation and the policies that should be employed to this end led to a profound politicization of monetary policy. This culminated in the Prime Minister Abe’s landslide electoral victory at the end of 2012 in which he campaigned on overcoming deflation, and then, once in power, effectively took over control of a previously intransigent BOJ Policy Board to reflate the economy. The democratic electoral process paved the way for a reassertion of control over the still legally independent central bank. From a wider perspective, these developments reflect broader changes in Japanese democracy: the greater influence of electoral incentives on policy and the centralization of executive power.

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Partisan and Electoral Motivations and the Choice of Monetary Institutions Under Fully Mobile Capital

International Organization ◽

10.1162/002081802760403757 ◽

2002 ◽

Vol 56 (4) ◽

pp. 725-749 ◽

Cited By ~ 27

Author(s):

William Roberts Clark

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Exchange Rates ◽

Central Bank Independence ◽

Time Inconsistency ◽

Social Planner ◽

Fixed Exchange Rates ◽

Mobile Capital ◽

Wide Range ◽

Institutional Solution

Central bank independence and pegged exchange rates have each been viewed as solutions to the inflationary bias resulting from the time inconsistency of discretionary monetary policy. While it is obvious that a benevolent social planner would opt for such an institutional solution, it is less obvious that a real-world incumbent facing short-term partisan or electoral pressures would do so. In this article, I model the choice of monetary institutions from the standpoint of a survival-maximizing incumbent. It turns out that a wide range of survival-maximizing incumbents do best by forfeiting control over monetary policy. While political pressures do not, in general, discourage monetary commitments, they can influence the choice between fixed exchange rates and central bank independence. I highlight the importance of viewing fiscal policy and monetary policy as substitutes and identify the conditions under which survival-maximizing incumbents will view fixed exchange rates and central bank independence as substitutes. In so doing, I provide a framework for integrating other contributions to this volume.

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A Post-Keynesian Perspective on the Rise of Central Bank Independence

The Oxford Handbook of Post-Keynesian Economics, Volume 2 ◽

10.1093/oxfordhb/9780195390759.013.0013 ◽

2013 ◽

pp. 264-289

Author(s):

Joerg Bibow

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Monetary Economics ◽

Central Banks ◽

Central Bank Independence ◽

Time Inconsistency ◽

Economic And Monetary Union ◽

Wide Range ◽

Historical Role ◽

The One

Central bank independence (CBI) refers to the relation between the central bank and the state, the legislature and executive. In practice, central banks typically engage in a wide range of activities related to the currency sphere and the financial system. The mainstream literature popularizing CBI features a “narrow central bank” approach that concentrates on central banks’ monetary policy functions only, ignoring important interdependencies between monetary policy on the one hand, and central banks’ historical role as government’s banker (as one link to fiscal policy) and their role in safeguarding the financial system’s stability on the other. This chapter investigates the rise in CBI as an apparent success story in modern monetary economics. The worldwide rise in CBI is partly due to the advent of Economic and Monetary Union (EMU) in Europe. This chapter also discusses the time-inconsistency argument for CBI, post-Keynesian criticisms of CBI, and whether John Maynard Keynes’s model of CBI strikes a sound balance between democracy and efficiency.

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