Political Independence and Technical Independence of Central Banks: a Crucial Distinction for European Monetary and Banking Union

• Autores: Nuno Valerio
• Localización: Journal of European Economic History, ISSN 0391-5115, Vol. 44, Nº. 2, 2015, págs. 9-37
• Idioma: inglés
• Enlaces
  • Texto completo
• Resumen

  • European economic history of the 19th and 20th centuries provides several examples of monetary unions, that is to say, mergers into a single monetary administrations of several previously distinct monetary areas. Comparison of these processes with the on-going trend of European monetary union shows that there are significant differences and less important similarities. Even so, such a comparison provides fruitful insights on the main problems that the process of European monetary union must face. One of these problems is the role of central banking, and the question of central banking independence. Current literature on the subject usually presents a holistic definition of the concept and links it to the goal of preservation of monetary stability. However, for historical and analytical reasons, a distinction should be made between political independence and technical independence of a central bank.

    Whenever the political decision-makers set some goal for the central bank, the central bank cannot be considered as politically independent.

    Whenever the central bank is allowed to pursue its goals, however chosen, without government interference, the central bank can be considered technically independent. Historical analysis shows that central banks are not usually politically independent, but became technically independent during the 20th century. The preservation of this distinction appears as a crucial element for a successful European monetary and banking union in the 21st century.