Abstract:

It is argued that credibility problems in macroeconomics hardly exist, and certainly do not motivate central bank independence. The Rogoff banker, and much work which follows should be interpreted as blueprints for good policy, not institutional reforms. There are likely to be significant but at present unquantified costs associated with central bank independence once the interaction of monetary and other policymakers is recognized. The evidence that central bank independence reduces inflation or brings other benefits is questioned.

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