Can Central Banks Conduct Unconventional Monetary Policies While Maintaining their Independence?

Niels Thygesen Professeur émérite d’économie, université de Copenhague ; membre du comité Delors sur l’UEM (en 1988-1989). Contact :

In the course of the 1970s and 80s, central banks became focused on price stability as a prime objective, and they were given more independence to assure such a mandate. Both developments grew out of practical experience combined with a new perspective on macroeconomic theory. The design of the ECB is a prime example; steps were taken to explicitly exclude objectives and/or instruments that might have distracted the ECB. After 2008 central banks in the US, the UK and Japan embarked on unconventional policies – massive purchases of securities and guidance to markets about future policy actions – in order to get around their inability to lower the short-term policy rate further; this brought them closer to governments, though as yet without any formal change in their independence. The ECB has not followed suit; the heterogeneity of the participants in the Euro area has made unconventional policies less useful or outright impossible.

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