Download Building Credible Central Banks: Policy Lessons For Emerging by N. Tshiani PDF

By N. Tshiani

A reputable valuable financial institution can successfully lead the method of monetary region reform in a constructing state. This publication discusses significant banking concerns and gives a transparent route to development credible primary banks in rising economies.

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On the other hand, it appears that elected officials in many countries apparently understand the incentives under which they operate and have structured charters for their central banks that, in effect, tie their own hands – that is, they limit political interference with monetary policy to enhance the prospects of achieving and maintaining price stability. Nevertheless, the urge to exert political pressure – to support the objectives of the administration as well as those of the Parliament, to take the Congolese case, and at other times to support the re-election of the president or of parliamentarian or senatorial incumbents – sometimes becomes irresistible.

A law or a practice has constitutional force if it cannot be changed without resorting to lengthy discussion and, in the case of a law, by a super majority or its equivalent. For example, in the United States, the 4 Building Credible Central Banks gold standard once had constitutional force even though it was never written into the Constitution explicitly. In many countries, debate over a legislated inflation target has been extremely valuable in helping to create a consensus of constitutional force.

Conclusion There is no uniquely optimal way to write a central bank law and to institutionalize central bank practices. Different countries have different histories and different preferences. Among those successful in promoting price stability and economic growth, there are three common elements. First, the government should assign clear and realistic objectives to the central bank. A legislated inflation target is a good idea, but more important than legislation is an understanding in the society that low and stable inflation is the central bank’s responsibility and that the bank should be judged on how well it achieves that objective.

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