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Independence of the Central Bank and Monetary Policy: Implications for the National Bank of Ukraine

Danylenko, Olena (2010) Independence of the Central Bank and Monetary Policy: Implications for the National Bank of Ukraine.

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Abstract:The central bank independence has been one of the central problems discussed in the literature on public policy economics. The concept of an independent central bank was recognized as a “good practice” that contributes to the better control of inflation and most countries try to improve the independence of their central banks in order to maintain stability. The central bank independence is more often analyzed together with its accountability. In the literature CBI is considered as an objection to the Central bank accountability. At the same time, accountability is viewed as an important complementary tool for the CBI. The potential problems for the CB can be revealed in the dimension of NBU-government relations. The politicians tend to exercise pressure on NBU in order to secure their interests. In this context conflicting goals of the CBs in the dimension of fiscal-monetary authorities’ relations can be viewed as important determinants of the CBI. The external credibility pressure via open economy and relations with the international financial institutions (in particular, IMF) can serve as another determining factor of the enhancement of the CBI. The paper, basing on the theoretical assumptions on the CBI and central bank accountability, aims to compare the actual and legal dimensions of the NBU’s independence, highlight the main challenges that the NBU is facing conducting its monetary policy, and identify the main determinants that are at stake for the NBU’s independence. On the basis of conducted analysis, the paper explains the potential problems for NBU’s actual independence and provides recommendations for the possible lines of reformations of the institutional settings that would enhance NBU’s independence and effectiveness of the monetary policy
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:88 social and public administration
Programme:Public Administration MSc (60020)
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