Populism and Central Bank Independence

22 Pages Posted: 4 Jul 2017

See all articles by Charles Goodhart

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Rosa M. Lastra

Centre for Commercial Law Studies, Queen Mary University of London

Date Written: June 2017

Abstract

The consensus that surrounded the granting of central bank independence in the pursuit of a price stability oriented monetary policy has been challenged in the aftermath of the global financial crisis, in the light of the rise of populism on the one hand and the expanded mandates of central banks on the other hand. After considering the economic case for independence and the three Ds (distributional, directional and duration effects), the paper examines three different dimensions in the debate of how the rise in populism - or simply general discontent with the status quo - affects central bank independence. Finally, the paper examines how to interpret the legality of central bank mandates, and whether or not central banks have exceeded their powers. This analysis leads us in turn to consider accountability and, in particular, the judicial review of central bank actions and decisions. It is important to have in place adequate mechanisms to "guard the guardians" of monetary and financial stability.

Keywords: accountability, central bank independence, Judicial review, Legitimacy, Mandates, populism

JEL Classification: E50, E58, H10, K10

Suggested Citation

Goodhart, Charles A.E. and Lastra, Rosa M., Populism and Central Bank Independence (June 2017). CEPR Discussion Paper No. DP12122, Available at SSRN: https://ssrn.com/abstract=2996667

Charles A.E. Goodhart (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
0207 955 7555 (Phone)
0207 242 1006 (Fax)

Rosa M. Lastra

Centre for Commercial Law Studies, Queen Mary University of London ( email )

67-69 Lincoln's Inn Fields
London, WC2 3JB
United Kingdom
+44 20 7882 8070 (Phone)
+44 20 8980 8101 (Fax)

HOME PAGE: http://www.law.qmul.ac.uk/staff/lastra.html

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