№ 11/2020

Fìnansi Ukr. 2020 (11): 35–55https://doi.org/10.33763/finukr2020.11.035

MONETARY POLICY

LYUBICH Oleksandr ¹, BORTNIKOV Gennadiy ², SHULGA Natalia ³

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-9339-4242
²SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0001-8388-6721
³State University of Trade and Economics
OrcID ID : https://orcid.org/0000-0003-3575-1974

Independence of the central bank as a monetary policy authority

The central banks as bodies of monetary policy have a special mission to promote financial stability. Fulfilling this mission can blur the line between monetary and fiscal policy and threaten to independence of monetary authority under the political pressure. On the other hand, the central bank cannot be a completely autonomous structure that makes irresponsible decisions, which neutralize the positive effect of fiscal measures, especially in stimulating the economic growth. There is a risk of wrong or improper monetary policy decisions by a collegium that lacks a balance of power between representatives of stakeholders. The central bank management should take into account government recommendations, but should not follow its instructions as directives. This dilemma is particular complicated in emerging economies. Monetary policy should be highly discretionary with dual goals: financial stability as a prior goal for a central bank followed by positively impact on the economic growth, which is measured by a set of indicators, including the rate of GDP growth and the reduction of unemployment. The independence of the central bank needs a critical rethinking in the context of large-scale anti-crisis extraordinary measures. An organic component of independence is central bank accountability, the content of information disclosure and validity of evaluations of its activities according to clear criteria. Moreover, it is necessary to determine the optimal level of central bank autonomy, which should not be equated with the usurpation of monetary power by the executives. The central bank’s independence index can be considered as an indicator of security for monetary policy. It is expedient to carry out annual monitoring of the modified central bank independence index for a sample of peer group of countries with similar economic development to identify lag or lead for the National Bank of Ukraine in terms of the degree of independence.

Keywords:central bank, monetary policy, fiscal policy, financial security, lobbying, corporate governance

JEL: E42, E52, E58

Lyubich O. . Independence of the central bank as a monetary policy authority / O. . Lyubich, G. . Bortnikov, N. . SHULGA // Фінанси України. - 2020. - № 11. - C. 35-55.

Article original in Ukrainian (pp. 35 - 55)

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