Central Bank indipendence: theories, case studies, accountability.

The purpose of this work is to address one issue that attracted great interest in the 1970’s and 1980’s, and that it is returning once more to the core of the debates nowadays: the independence of the central banks. Central banks as institutions were created starting from the end of the XVIIth century, the Bank of England and the future Bank of Sweden being the firsts. In time, their utility was debated, and some economists argued in favour of a free banking system. Almost a century after the writings of Bagehot, the discussion started to address another topic: ought such institutions be dependent from the state, or they should be autonomous? And this autonomy should refers to the objectives of monetary policy, to the instruments through which pursue this goals, or to both? The crucial aspects involves considerations about the concepts of efficiency and accountability, sometimes depicted as mutually exclusive, sometimes portrayed as compatible. Often the discussions focused only on one of the side, concentrating the lens of the analysis either on the economic aspects or, less frequently, on the point of view of political science. In order to provide a broader point of view of the debate, this work will try to present the issue from the different perspectives. The first chapter will be dedicated to the economic literature that led, through the second part of the XXth century, to an increasing greater support from independents central banks. Many authors underlined that many of flaws that those institutions featured could be prevented or contained relieving the Banker from excessive influence, pointing for example at time-inconsistency problems (among others, Kydland and Prescott in 1977 and Barro and Gordon in 1983) or, more in general, at inflationary biases. The selection of a conservative Governor could help in correcting this bias, Rogoff suggested in 1985; others, like Walsh in 1991 and Persson and Tabellini in 1993, preferred the way of inflation targeting and performance contracts. All those findings seemed to support the need for a more independent Central Bank. The second chapter will shift the focus to some methods of measurement of autonomy, which cannot be overlooked. The deep attention dedicated to measurements was also expression of a peculiar need: to address the difference between de jure and de facto independence. In 1992 Cuckierman produced an effort to tackle the problem, and its indexes became an important part of the subsequent literature. Still, it made a large use of the background prepared by other authors who came before, so also the works of Bade and Parkin, Grilli Masciandaro and Tabellini will be addressed. The third chapter will move to a more historical point of view. The purpose is to match the findings of the previous chapter, purely theoretical, to the development that central banks actually had through the last decades of the century. Three cases will be considered, each one with some interesting differences from the others, both in the path and in the structure. The first will be the Bank of England: the relations between central banks, Prime Minister and Chancellor of the Exchequer anticipated some of the concepts of the forth chapter about the heterogeneity of social and political spheres; the Federal Reserve will also provide an useful example, given its peculiar structure and accountability; finally, the European Central Bank and the difficult path toward its formation could show not only the influence of the studies mentioned in the first chapter, but also some of the crucial problems related to accountability.Finally, the fourth chapter will adopt the point of view of political sciences. An interesting point of view which will be presented is that central banks could represent one of the neutral institution which act as check and balances of the system, preventing abuses from the government. On the other hand, some of the liabilities of these reasoning will also be underlined.