The Measure of Financial Regulators’ Independence
The benefits of central bank independence are accepted by almost everyone nowadays. And there is growing evidence that financial regulation works best – boosting the stability of the banking system – when regulators and supervisors have similar independence.
LONDON – There is a vast academic literature on central bank independence, and central bank governors address the topic at every opportunity. Most of the academic papers, and all of the governors, argue that a high degree of independence is associated with low inflation and monetary stability.