Central Bank Independence and challenges during the global pandemic: balancing monetary and fiscal policy objectives

Ojo, Marianne and Roedl, Marianne (2021): Central Bank Independence and challenges during the global pandemic: balancing monetary and fiscal policy objectives. Published in: CIISD Economic Review

Abstract

As well as highlighting why unconventional and conventional accommodative monetary policies have been propagated as being crucial to achieving dual mandates and goals of leading central bank economies, drawing from lessons and experiences whereby accommodative monetary policies have been instigated as a means of addressing prolonged periods of low inflation, this paper highlights how such experiences can also be used to bolster the proposition that "since monetary policy space is limited, and since many of the challenges faced are beyond mandates of central banks, these should be addressed through structural and fiscal policies. "

The concept and notion of central bank independence has been interpreted and applied differently across several jurisdictions over the decades. As the financial environment over the years, with the emergence of more complex trading and financial instruments, the traditional tools of central banking - as well as monetary policy tools and channels of transmission have adapted to cope with corresponding changes, challenges and demands of the financial environment. Why are interest rates at such historically low levels? These constitute some of the questions, amongst several research objectives which will be highlighted under the introductory section, that this paper aims to address.

• Item Type: MPRA Paper
• Language: English
• Keywords: counter-cyclical instruments; Effective Lower Bound; interest rate; accommodative monetary policies; asset purchase program; quantitative easing; uncertainty; government bonds; negative interest rates; inflation
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; K - Law and Economics > K2 - Regulation and Business Law

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