Under the rubric of the Committee on International Economic and Policy Reform, a group of academics and former government officials are working on ideas that can further financial reform. Its latest effort examines how to revamp central banking in the aftermath of the financial crisis.
An excerpt:
The actions needed to achieve price stability, such as the maintenance of high interest rates, can be politically unpopular, among other reasons because they slow growth. It follows that the pursuit of price stability can be made more credible and thus more effective by granting independence or at least operational autonomy to the central bank. Otherwise, central banks may be subject to political pressure to attach greater weight to other objectives, making it harder for them to contain inflationary expectations and deliver desirable outcomes.
