How and to what extent does the independence of the central bank from the government's fiscal policy affect the effectiveness of monetary policy in stabilising the macroeconomy, especially in the context of economic crises?

My research shows that despite their formal independence, central banks' monetary policies are often politicised, which is reflected in their involvement in anti-crisis measures. Stimulating the economy by issuing national money can bring short-term growth, but it often leads to inflation as well. Central banks are criticised for their delayed reactions to rising inflation, which worsens the situation of borrowers. In turn, tightening monetary policy makes access to credit more difficult, which slows down the economy. The belated raising of interest rates does not effectively curb inflation and deepens the slowdown, undermining the sense of further tightening the policy. In addition, governments often pursue expansionary fiscal policies, increasing public spending without proper control, which makes it difficult for central banks to control inflation. The problems of companies, especially in the SME sector, are the result of misguided economic policies, inflation and external crises such as energy crises. The costs of these mistakes are borne by society as a whole. Monetary policy, despite the formal independence of the central bank, is often used as an instrument of intervention in crises, which carries the risk of further crises. Lack of coordination with fiscal policy and delayed response to inflation have negative consequences. The balance between saving the economy and financial stability is crucial. Over-reliance on monetary policy in crises can lead to wrong decisions, the costs of which are borne by society. The independence of the central bank, transparency and responsible economic policy are important.

Therefore, despite their formal independence, central banks' monetary policies are often exposed to politicisation and used as a tool for intervention in crises, which, combined with a lack of coordination with the government's fiscal policy, leads to macroeconomic destabilisation, rising inflation, economic slowdown and the transfer of costs to society.

I have written about the sources of the high inflation that has occurred since 2021 in the wake of the Covid-19 pandemic in the following article:

THE POST-COVID RISE IN INFLATION: COINCIDENCE OR THE RESULT OF MISGUIDED, EXCESSIVELY INTERVENTIONIST AND MONETARIST ECONOMIC POLICIES

Article THE POSTCOVID RISE IN INFLATION: COINCIDENCE OR THE RESULT O...

I have described the key aspects of the monetary policy pursued by central banks in recent years in the following article:

Comparisons of the monetary policy of the central banks of the Federal Reserve Bank and the European Central Bank and the National Bank of Poland

Chapter Comparisons of the monetary policy of the central banks of t...

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I invite everyone to the discussion,

Thank you very much,

Best wishes,

I invite you to scientific cooperation,

Dariusz Prokopowicz