Tyler Cowen: Fed Independence Not Necessarily Good

Prominent George Mason University Professor Tyler Cowen writes:

Why are more independent central banks better at fighting inflation than less independent central banks?  There is nothing magical about independence that makes for low-inflation.  Suppose we pick someone at random and give them complete power over monetary policy.  Such a central banker would be very independent but I wouldn’t count on this policy resulting in much in the way of systematically lower inflation.

We should not be surprised, for example, that “independent” central banks tend to make lender of last resort decisions that protect banks and bankers.

If we must have a central bank, Cowen’s argument is that independence isn’t necessarily going to help.  In other words, audit the Fed.  More here.

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