Question

1. What are the main problems with having a central bank that is not independent of the rest of the government?

Answer 1

More dependent Central Banks have more tendency to have higher inflation. A less dependent central Bank can more effectively keep focus on maintaning low inflation.

Central Bank indipendance is largely approved as a required element for auccesful monetary policies. When the major issue is high inflation, independence from goverent and political process is apparently helpful.
Dependancy of Central Bank is trouble as the policy makers cannot take tough decision without taking political influence.
Poor Central Banking policies eventually tends to outspend governments their own budget constraints.
The dependancy of the Central Bank have made difficulty to design neutral monetary policies.
The most blatant offenders are the Federal Reserve, European Central Reserve, and Bank of Japan. In the light of their offend. modern analysts have called for apparent reform in the Central Banking system. Where independancy is supreme importance for an impressive central bank policy.

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