Dr Posen argues that central bank independence is not primarily a matter of reputation, but of reality.
He says, "The substance of central bank independence is giving monetary policy setting committees the legal autonomy to refuse demands to purchase debt instruments..." But that does not mean central banks should not purchase bonds when it is right to do so. He says, "...the counter-inflationary credibility of central banks is not fragile to voluntary purchases of bonds, public or private, made with reference to clear economic (as opposed to political) justification."
Published on
14 June 2010