Is the era of central bank independence drawing to a close?
Of course, the merits of independent central banking can be overstated.
Central bankers have credited themselves with delivering sustained low inflation in the 1990s and 2000s — the Great Moderation — when in reality stable prices were largely the product of a global labour market shock.
This resulted from the incorporation of China and other developing countries into the world economy.
The ability to carry out monetary policy insulated from governmental pressure is clearly valuable.
The logic is that elected governments have an incentive to lower unemployment in the short run at the expense of longer run impacts on inflation and growth.
They also have an incentive, when heavily indebted, to rely on inflation to reduce the real value of debt obligations.
US economy will confront big supply shocks coinciding with expansionary fiscal policy.
John Plender Financial Times 29 November 2024
The Great Moderation is dead
Tillbaka till Rolfs länktips 30 November - 1 December 2024
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