Essays in Honour of Charles Goodhart, Volume One
Edited by Paul Mizen
Chapter 2: Central bank independence
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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