Question

In: Finance

Should the Central Bank (FED) be independent from Executive Branch (the President) oversight? Would a country...

Should the Central Bank (FED) be independent from Executive Branch (the President) oversight? Would a country benefit from coordination between the central bank and the executive branch of government?

Solutions

Expert Solution

YES, I think that central bank should be independent from executive branch because the goal of Central Bank is to maintain an adequate money supply in the economy by use of adequate monetary policy and President will always be acting in his own interest by influencing the decision of the Federal Reserve chairman as he will be trying to influence the people whereas, Federal Reserve chairman does not have any bias related to people and he should be acting in the best interest of economy so he should be left independent in order to decide the best appropriate policy which is suitable for the economy

There should be a coordination but the independence should be completely established for the Federal Reserve because I will be helping to a certain extent as fiscal policies of the government are supportive policies for the monetary policies of the Federal Reserve and there should be a complete independence of the Federal Reserve in deciding upon the best suitable policy which with be adopted for maximization of the interest of the people as it should be independent enough to prepare monetary policy in accordance with various economic cycles proactively rather than just following the president and deciding upon the policies which is influenced by the president so it should always be independent.


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