Money and banking Should a central bank be independent or be under the control of government?...

Money and banking

Should a central bank be independent or be under the control of government? please van you explain it to me in the simple words and with example

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Expert Solution

According to me the central bank must be independent from government control.As it would be then able to function it without being run by those in power or irrespective of the government at the center,it would then be more stable. and less likely to change policies according to the ongoing politics in the country.

If we have a case of dependence the government would want the central banks to make certain decisions which would be heplful only for a short term but likely to be destructive in the future.

In order to have a proper executuon of policies with long term planning without much interfereance the central naks must be handled independently.Moreover independent central bank have often had a low inflation rate as compared to dependent central bank.

Example: Federal reserve system (considered as ideal in banking industry) where it functions independently and not liable for approvals from anyone including the president.

Rahul Sunny answered 1 year ago

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disadvantages of there should be a global central government.

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