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Central Banking, Monetary Theory and Practice

Essays in Honour of Charles Goodhart, Volume One

Edited by Paul Mizen

Celebrating the contribution that Charles Goodhart has made to monetary economics and policy, this unique compendium of original papers draws together a highly respected group of international academics, central bankers and financial market regulators covering a broad range of issues in modern monetary economics. Topics discussed include: central bank independence; credibility and transparency; the inflation forecast and the loss function; monetary policy experiences in the US and the UK; the implications of Goodhart’s Law; the benefits of single versus multiple currencies; and money, near monies and credit.
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Chapter 2: Central bank independence

Charles Freedman


Charles Freedman1 INTRODUCTION It is an honour and a privilege for me to be participating in this festschrift for Professor Charles Goodhart. I have known Charles as a senior member of the staff of the Bank of England, as an academic, and as a member of the Monetary Policy Committee of the Bank. And in all three guises he has been the consummate professional, addressing real issues with technical proficiency and presenting his ideas in a way that is accessible to less technical readers. Indeed, one of Charles’s great virtues has been his ability to bridge the gap (sometimes a chasm) between academics and policy-makers, drawing the attention of the academics to policy issues that need to be addressed, and interpreting and assessing the value of new ideas coming from academia for the benefit of policy-makers. And all this with a wonderful sense of humour and excellent writing and speaking styles. Two of the most interesting and striking developments in central banking over the latter part of the twentieth century have been the spread of central bank independence (CBI) and the increased focus on the importance of an explicit objective or mandate for central banks (the latter leading in many countries to the use of inflation targets). The period of high inflation that began in the mid-1960s and has come to be called the Great Inflation was probably the key factor in motivating both of these developments. In addition, the theoretical and empirical literature on...

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