Understanding Central Bank Independence

Abstract

This article asks a simple question that does not have a simple answer: whose interests do independent central banks serve? Employing a Polanyian lens, we explore the many facets of independent central banks, including their history, their institutional nature and functions, and the academic debate surrounding them, in order to reach several conclusions that can hopefully continue to expand the debate regarding the issue.

Keywords:

• Central bank independence
• monetary standards
• Polanyian theory

JEL Classifications:

• E58
• E42
• B31

Acknowledgements

We wish to thank the two referees for their very helpful comments. All remaining errors are our own.

Notes

1 Dickens (2022) argues that “In March 1953, the Federal Reserve triggered a financial crisis and the 1953–54 recession by exercising its newfound independence for the first time”.

2 We also quickly mention here that national Treasury departments have also served this role in many times and places.

3 Dostaler and Maris (2000) offer a very interesting discussion of Freud's influence on Keynes, particularly in regards to gold.

4 Bibow (2010) does include a brief discussion on the matter.

5 A Mitch Hedberg joke.

6 Mark Twain.

7 As was the stated intention of Volcker (1978, 3–4).

Additional information

Notes on contributors

Wesley C. Marshall

Wesley C. Marshall is Professor at the Department of Economics, Universidad Autónoma Metropolitana – Iztapalapa, Mexico, and Associate Editor of the International Journal of Political Economy.

Louis-Philippe Rochon

Louis-Philippe Rochon is Full Professor of Economics at Laurentian University, Canada, Editor-in-Chief, Review of Political Economy and Founding Editor Emeritus, Review of Keynesian Economics.