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Provide arguments for and against the proposition that a central bank should be allowed to set its own objectives.

2006-12-15 02:52:41 · 1 answers · asked by johnmclain1 1 in Business & Finance Investing

1 answers

Central banks role is to create public good. Politicians are normed to take political decisions. So there can be conflict of interest. Politicians might look for vote banks through their decisions where as Central Bankers has to stear the economy for public good. So allowing the Central Bankers to set it's own directions is more purposeful for the populous in general. Like the growth rate in the economy, unemployment rate, GNP targets, inflation targets etc;. Political decisions might have more paternalistic needs which may not be economicaly feasible. I believe always there is a saddle point where the decisions actually happen when it comes to game generated between politicians and the central bankers.
Former consultant to Fed Reserve USA.

2006-12-15 05:45:07 · answer #1 · answered by Mathew C 5 · 0 0

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