Independence, credibility, and communication of central banking: an overview

Abstract

The institution of central-bank independence is often lauded as a great conquest of the accumulation of knowledge and the sensible setting of policy. The economic literature is filled with arguments for why an independent central bank would lead to better outcomes. To this prior, the experience of the last couple of decades has added the supporting data. Independent central bankers have been, for the most part, able to keep inflation under control despite shocks and macroeconomic volatility. Whether during the Global Financial Crisis, through individual country slumps, or at the trough of the pandemic recession, independent central banks were typically part of the solution rather than part of the problem. Attacks on the independence of a central bank nowadays typically generate a strong pushback from the press and civil society.