Common in developing countries, treasury dominates on the central banks and monetary policy serves as subsidiary to the fiscal policy. This may be called as week independence. but most importantly, however, The CB has independence in papers and claims to do so while announcing the policy. To me this gives birth to "false independence", which, to me, is different from "week independence" in terms of decision making by the tinkerers at the bank and the implications drawn for the economy.
According to my point of view, it depends on the CB's objectives. Currently, many central banks turn away from german model of central banking (primary objective = price stability) and focus on variety of different objectives. It is not surprised because the transmission channels interconnect through the world. Thus, central banks react on the current situations within the economies (which is also determined by changes in fiscal policies). Of course, we can discuss false independency of central banks in overindebted countries (Greece in the EU where ECB purchase government bonds) but central banks should react on liquidity shocks (which often follows debt crisis, see Bagehot's doctrine). My opinion is that current situation is different story, not similar to discussion about independency or false independency.
The institution of central bank is never independent of political elite. From the BIS to the FED to the bundles bank political affiliation is an open secret. Consider the leadership of IMF and World bank, powerful forces lobby for their presidents. Their is need to encourage private note issue to take away central bank money and encourage efficient banking practices.
A Central Bank is conservative when prioritizes inflation over other objectives and independent when it maximizes its own utility function. The literature on independence measurement has made the distinction between de facto and de jure independence. The situation you depict is one of a de-facto non-independent Central Bank. False independence sounds like a nice description of a situation where the cb, while independent by law, maximizes other agent's utility function in practice. The question then arises of how would should we call the symmetric case, of de facto independence when de jure the cb is non independent
No. These are 2 separate issue. There are both fiscal independence and monetary policy independence. While the treasury is in charge of the former, the central bank oversees the latter. However, there is supposed to be policy harmonization and coordination to ensure policy effectiveness. Either can lead in policy formulation and implementation, depending on judged effectiveness of the policy interventions.
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