Controlling inflation in transition economies: The relevance of central bank independence and the right nominal anchor |
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Authors: | Helmut Wagner |
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Institution: | (1) Fernuniversitaet Hagen, Germany |
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Abstract: | Controlling inflation is a central problem in transition economies. This paper asks under what conditions or even whether
central bank independence helps in this task. The conclusion shows that merely imposing legal independence on the central
bank may be ineffective or even counterproductive. It is necessary to make a monetary strategy and the responsibilities and
restrictions of central bank policy transparent to the public. In addition, it is important that the right nominal anchor
is selected—one that is, or is believed to be, effective and sustainable. Both monetary targeting and inflation targeting
are assumed to be unsuitable for most transition countries. Instead, some kind of dynamic exchange rate targeting appears
to be the most reasonable choice. |
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Keywords: | |
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