Question

Critics of  Federal Reserve independence say that the central bank and government must be tightly coordinated in their economic policy and that central banks must have regulatory oversight. Do you agree or disagree? Why?

Answer 1

As per the present scenario is concerned, Federal reserve in only responsible for reporting to the United States Congress and it is not responsible for any kind of public disclosure or it is not responsible to the Federal government as well so critics of Federal Reserve independency will be often advocating that Central Bank and government must be tightly coordinated in the economic policy and Central Bank must have regulatory oversight because it would be leading to fixation of responsibilities when there is an adverse economic cycle because it is often seen that Central government has unnecessarily forced the central banks to cut interest rates in order to help the society but they are in fact leading to decreasing in the overall value of the currencies and other negative impact in the long run so it is important in order to fix the responsibility to have a federal reserve who is responsible to the public and their disclosures should be made public rather than private.

When Federal Reserve and Federal government will be accountable to the general public, that will ensure a high degree of responsibility in the system and it will enhance the decision-making also and it will also enhance the monetary policy according to various different economic scenario which will be in line for long-term economic development.