Instrument and goal independence independent revenue

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: cture is written by Congress, and is subject to change at any time. Presidential inuence Inuence on Congress Appoints members Appoints chairperson although terms are not concurrent Should the Fed Be Independent? The Case for Independence The strongest argument for an independent central bank rests on the view that subjecting It to more political pressures would impart an inationary bias to monetary policy The Case Against Independence Proponents of a Fed under the control of the president or Congress argue that it is undemocratic to have monetary policy (which aects almost everyone in the economy) controlled by an elite group that is responsible to no one The Case for Independence Political pressure would impart an inationary bias to monetary policy Political business cycle Could be used to facilitate Treasury nancing of large budget decits: accommodation Too important to leave to politiciansthe principal-agent problem is worse for politicians The Case Against Independence Undemocratic Unaccountable Dicult to coordinate scal and monetary policy Has not used its independence successfully Explaining Central Bank Behavior One view of government bureaucratic behavior is that bureaucracies serve the public interest (this is the public interest view). Yet some economists have developed a theory of bureaucratic behavi...
View Full Document

Ask a homework question - tutors are online