Central bank independence: the evidence

Article Abstract:

The United Kingdom government gave greater independence to the central bank, or Bank of Englnad, in May 1997. This independence is limited in that the government still appoints the central bank governor, sets inflation targets and receives most of the Bank's profits. The government has tended to give weight to the Bank's opinions prior to its independence. Independence is seen as likely to lead to low inflation, though strong economic growth rates are also desirable. Central bank independence may not be the only reason for inflation being low, and other factors related to the wider society may be responsible.

United Kingdom, Bank of England, Economic policy

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The role of central banks

Article Abstract:

Central banks are inevitably involved in the conduct of monetary policy, as the conduct of monetary policy must include the setting of short-term interest rates. However, decisions about what rate to set may not be taken by the central bank. In many countries, central banks bear the responsibility for supervising the banking system. However, supervising the banking system can lead to conflicts of interest if the central bank has independent responsibility for the conduct of monetary policy. In some cases, central banks manage the national debt.

Management

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The structure of interest rates

Article Abstract:

Recent research has focused on how interest rates on longer-term and risky loans are determined. These tend to be established on the basis of short-term, risk-free rates, and have to represent a balance between the willingness to lend funds and the demand for them. All economies have many different interest rates, reflecting the differing levels of risk associated with different types of loan.

Research, Interest rates

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