![]() ![]() ![]() Out of one hundred seventy-nine countries observed in 2012, the United States ranked 136th or 158th. Garriga (2016) offers two additional measures of central bank independence. 6ĭepending on the measure employed, the United States ranked 82nd (tie), 83rd (tie), 84th (tie), or 87th. Dincer and Eichengreen (2014) present four indices of central bank independence for eighty-nine countries in 2010. Indeed, it is less independent than most other central banks. The Federal Reserve is not immune to political pressure ( Binder & Spindel, 2019). 4īut one must be careful not to confuse the desirable with the factual. Finally, we offer some suggestions for bolstering de facto independence at the Fed.Īt least since Cukierman (1992), most economists have recognized the importance of central bank independence for safeguarding monetary policy from short-term political pressure. In brief, the regime change increased the appointment power of the President and improved the bargaining power of Congress. Then we explain how the regime change reduced de facto central bank independence. In what follows, we survey the literature and describe the Fed's new operating regime. We argue that, despite leaving de jure independence unchanged, the Fed's new operating regime exposes the central bank to a greater degree of political influence. The United States ranks in the bottom quartile of countries on several measures of central bank independence. The Fed is not even independent in a comparative sense. The appointment process provides one channel through which monetary policy might be influenced. While the Fed is nominally independent (i.e., it is not an agency of the federal executive departments nor the Executive Office of the President), it is nonetheless subject to political pressure. With so many appointments available, some expressed concern that the President might reshape the Fed to his advantage-reviving old questions about central bank independence in the process. Janet Yellen's decision to resign, following her replacement as Chair by Jerome Powell in February 2018, opened a fifth spot. The resignations of Daniel Tarrulo in April 2017 and Stanley Fischer in October 2017 created two more. Political gridlock prevented the previous administration from filling two vacancies. In just four years, President Trump had the ability to make no fewer than five appointments to the Federal Reserve's seven-member Board of Governors. ![]()
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