Thanks for posting an interesting topic. My personal opinion is as follows:

Is the independence of the central bank from the government full and real now?

If you read the mandate (Law, Statutes, Acts) then it appears to independent. But when you see the news how Governors of Central Banks are appointed, you will be disappointed to read the political interventions.

What is your opinion about the central bank's independence from the government?

I think in papers the central banks are independent from government and fully autonomous in their actions. But the top level management of central banks and that of the government is influenced by each other. (Who so ever is strong influences the other) Read "Regulatory Capture Theory" for more insights.

Is it full and real independence? Should there be full independence or only on some issues?

As per my understanding the central banks should be independent but the operational frame work of the central bank should also be there to cater the needs of independence. Moreover, a strong code of conduct should also be there.

Or maybe the central bank should run a fully coordinated, parallel cooperation with the government regarding the common economic policy?

I don't agree to it. (Its my humble opinion, anyone can disagree to it). I think it creates a conflict of interest.

Should the monetary policy of the central bank be coordinated with the government's budget policy and to what extent? How is it in your country now?

There should be a clear line of distinction b/w the role of government, finance division and economic policy unit of central banks. Otherwise, each one will be acting in other's jurisdiction.

How do you assess the issue of cooperation between the central bank and the government?

If proper TORs are present on both ends and the affairs of central banks are not re-positioned b/w the two. Then its okay.

Should the central bank be used by the government to conduct a specific interventionist, anti-crisis economic policy?

I look at it differently, there's government, there's central bank & then there are other institutions such as Office of the Ombudsmen, Banking Ombudsmen, specialized commissions such as the competitive commissions, better business bureaus etc. Central bank is responsible for the overall financial market discipline. That's why it has to be independent. (You can read who was blamed after every credit crunch, financial crises, sub-prime mortgage crises). That's why the responsibility should be given to the central bank.

It isn't and shouldn't be. Every government has their own economic agenda which need to be collaborated with central bank. I think government should have role in strategic agenda of the central bank but not in operational matters and execution.

Very relevant question these days, especially due to the current ongoing talk about the independence of the Indian central bank i.e. the Reserve Bank of India.

Is the independence of the central bank from the government full and real now? The central bank's independence from the government has never ever been real.

Ideally there should be full independence but in most of the cases the central banks are continuously cooperating with the govt. in place and do consider the direct or indirect instructions. The autonomy seldom exists due to political pressures because the govt. has to look the decisions from the prospective of populism. Again, the appointments, promotions and transfers of the central bank employees being in the hands of the govt., limits the true independence of these

organisations.

This is a confronting question.

Independence of central banks from national governments is required for independent and effective monetary policy.

This does not seem to be the case in a majority of countries in the world.

It is worse of than it was in the past.

It can never be totally independent from the Government.

Dear Friends and Colleagues of RG,

The above discussion shows that there is dominance in the subject of incomplete independence of the central bank from the government.

Therefore, I am asking you with the following question:

What should be the scope of the central bank's independence from the government if full independence does not exist in practice?

What should be the scope of the central bank's independence from the government if full independence does not exist in practice? How should the central bank's independence from the government be organized institutionally and mainly what issues should it concern? Should the scope of independence change in the event of financial and economic crises?

My question stems from a large scope of central banks' intervention in economic processes in the field of bankruptcy of many banks and corporations, when the largest global financial crisis so far occurred in autumn 2008.

Please reply

I invite you to the discussion

Thank you very much

Best wishes

Dear Colleagues and Friends from RG,

For our discussion, I would like to add another, significant, following issue regarding this topic:

The role of central banking in shaping the security of the financial system of the state.

Endless discussions have been going on for a decade, in which economists and financial market analysts argue over assessing the potential effects of the 2008 global financial crisis and trying to work out a common position in formulating clear answers to the following questions:

1. What would be the potential effects, how much larger were the negative aspects of the recession in national economies and how much would the costs of running financing operations by central banks maintain liquidity in the financial sectors and how much would the budget expenditure increase in conducting anti-crisis socio-economic policy of state finances, etc. if the anti-crisis measures were not taken at the very beginning of the global financial crisis, i.e. in autumn 2008?

2. Is it possible to estimate precisely how much the recession in national economies would increase, how much unemployment would increase, consumption, employment, production, etc. would fall if central banks did not launch emergency rescue programs consisting in providing commercial banks with low-interest loans and buying loans from commercial banks that are not regulated by customers, i.e. deleveraging banks and restoring liquidity in the banking system?

3. Whether central banking and banking supervision institutions for financial rescue programs effectively enforced from commercial banks, in particular from investment banks, the necessary improvement of credit risk management systems so that these banks in the future would not lead to such a high increase in credit risk above the level optimal and secured in necessary reserves? Is the financial system lobby so strong in policy bodies that nobody enforces and accounts for it?

In my opinion, assistance provided to commercial banks as part of rescue and anti-crisis programs implemented by central banking should be related to the issue of analyzing the process of improving credit risk management. Without this correlation, commercial banks alone will not be able to fully and sufficiently improve their credit risk management systems and the likelihood of another financial crisis similar to that of 2008 will remain high. In view of the above, I believe that it is crucial to verify the correlation of improving credit risk management processes and the likelihood of the emergence of another global financial crisis. In order to clarify this correlation, I suggest undertaking research to answer the following research questions: Does improving credit risk management processes reduce the likelihood of the next global financial crisis?

Over 10 years have passed since the appearance of the previous global financial crisis in 2008. Has the operation of investment banks sufficiently improved in this period transactions in credit, derivative and securities markets to such an extent that the risk of the next global financial crisis is much lower than over 10 years ago? The improvement of specific risk management systems is particularly important in many areas of functioning of commercially operating business entities, financial institutions, public institutions as well as conducting investment, research and other projects. How important it is, for example, it was shown by the global financial crisis that appeared in mid-September 2008, when certain financial, investment and credit risk management systems were not properly improved and investment procedures, including credit procedures, were not reliably implemented.

As well as customer service, as well as breaking the rules of business ethics in investment banks operating at that time and many other types of financial institutions and business entities. Or maybe the real economy has already accumulated too large boom factors that mean a permanent, long-term slowdown in economic growth in at least the next few years and the crisis is inevitable despite the improvement of transaction procedures in banks and improvement of the credit risk management process? These issues are important in the context of analyzing the security of the financial system and the role of banking development in modern economies. On the other hand, the issue of linking the assistance offered by central banking to commercial banks as part of rescue and anti-crisis programs with the issue of analyzing the process of improving credit risk management is equally important. Does any of you examine this issue in the context of analyzing sources, factors of financial and economic crises?

I am researching this issue and invite you to cooperation. I described the results of my research in scientific publications that are available on the Research Gate portal. I invite you to cooperation.

What do you think about this topic?

Do you agree with me on the above matter?

Please reply.

I invite you to the discussion and scientific cooperation.

Thank you very much.

Best wishes.

Dariusz Prokopowicz

Central Banks are entrusted with Monetary Policies which affect the economy on matters dealing with policy rates, exchange rates or quantitative easing. Heads of Most Central Banks serve at the pleasure of the heads of state or rulers of the lands. They can be relieved of their duties if they pursue policies not in line with the ones who can fire them or pressure them to resign. The independence of Central Banks is therefore on paper but not in real world.

Edward C. Prescott stated that:

"You don't need high taxes to build a welfare state. Europe should also continue to integrate. By increasing competition and removing barriers to the flow of technology, integration would increase the productivity of euro area countries." Edward C. Prescott

Since the emergence of the global financial crisis of 2008, the scale of the so-called quantitative easing under the anti-crisis, mild monetary policy of central banking. It is a monetary policy instrument used as part of interventionist stimulation of economic processes when there is a strong decline in economic growth with a high level of public debt. However, what will happen when in a few years there may be another major economic crisis and all the key interventionist tools of anti-crisis budget, fiscal and monetary policy run out?

What is your opinion on this topic?

I am asking for an answer and invite you to a discussion,

Thank you very much and best regards,

Dariusz Prokopowicz

Dear all,

The problem of central bank independence from the government is huge in Ukraine. It is no secret that for many years the National Bank of Ukraine has fulfilled the orders of politicians who are friendly with the oligarchs. As you may be aware of the case of Privatbank.

After Ukraine's revolution of Dignity, during 2014-2019, the NBU initiated the recovery of the financial sector, successfully targeted inflation and maintained the relative stability of the national currency. Currently, the transparency and financial stability of the banking system is much higher.

What is the current situation in Ukraine? The result of the atypical crisis caused by the coronavirus, as well as the government's clumsy activities, is an increase in the budget deficit to at least UAH 300 billion. The budget deficit can be financed either by borrowing (internal or external) or by privatization. The government has no idea but to borrow to cover the budget deficit. We need to cover the budget deficit that was formed in 2020 by reducing inefficient government spending, verifying social benefits and pensions, reducing various types of benefits, transparent privatization after the crisis, and so on. Some countries finance the deficit by printing money but this would be a very bad choice for Ukraine. The NBU does not support this decision. And some “professionals” from the Verkhovna Rada are trying to initiate the resignation of the Chairman of the NBU. And only the firm position of the IMF, which is Ukraine's main creditor, enshrined in the Memorandum, supports the independence of the NBU.

Sincerely, Iryna Kondrat

Погоджуюсь з думкою колег про політичний вплив на Національний банк України. Кредитна Політика МВФ стосовно української економіки - це один з позитивних інструментів забезпечення стабільності.

Dear Everyone, Thank you very much for participating in this discussion and providing inspiring and informative answers to the above question: Is the independence of the central bank from the government full and real now? This discussion confirms the importance of the above-mentioned issues and the legitimacy of developing scientific research on the topic independence of the central bank from the government. This discussion shows the growing importance of the central bank from the government. Best wishes,

Dariusz Prokopowicz

Most of cases not 100% independence... For a long time, the ‘independence’ of central banks was hardly a subject of discussion, either in academic papers or the media. Germany was an exception. The independence of the central bank, the Bank deutscher Länder (BdL), was imposed in 1948 by the Allies, more precisely by the Americans (the representatives of the UK and France were not in favour of the idea). Chancellor Konrad Adenauer strongly opposed the idea of giving the Bundesbank, the successor to the BdL, the same status of independence. However, in light of the high reputation the central bank had already earned during the short period of its existence, public opinion, and the strict position of the Minister for Economics Ludwig Erhard, the chancellor had no choice other than to give in. As a result, the Bundesbank Law of 1957 codified central bank independence. ... Issing, O. (2018). The uncertain future of central bank independence. Hawks and Doves: Deeds and Words, 25.

The consensus that surrounded the granting of central bank independence in the pursuit of a price stability oriented monetary policy has been challenged in the aftermath of the global financial crisis... Goodhart, C., & Lastra, R. (2018). Populism and central bank independence. Open Economies Review, 29(1), 49-68.

International organizations (IOs) often drive policy change in member countries....IOs rely on a combination of hard pressures (ie, conditionality) and soft pressures (ie, socialization) … Reinsberg, B., Kern, A., & Rau-Göhring, M. (2020). The political economy of IMF conditionality and central bank independence. European Journal of Political Economy, 101987.

... The world experienced a startling convergence toward central-bank independence during the 1990s, as interests and ideas combined to make the notion into a virtually uncontested institutional norm. The ensuing boom years added credibility to the view that technocrats were superior to politicians in dealing with monetary affairs. The global financial crisis, however, exposed central bankers as powerful political actors rather than mere technocrats. Moving far beyond their narrow mandates, they became more overtly distributive and increasingly politicized agents. While unconventional monetary policy and financial supervision offer short-term benefits, they create future uncertainty and raise questions of political accountability... Jones, E., & Matthijs, M. (2019). Rethinking central-bank independence. Journal of democracy, 30(2), 127-141.

Dear D A Gayan Nayanajith,

Thank you for your comments and answers to the question:

Is the independence of the central bank from the government full and real now?

You added important points to our discussion and inspiration for our deliberations. You pointed out the significant determinants of the issue of central banking independence and the role of monetary policy and specific instruments of this policy used in the interventionist activities of the central bank in the functioning, situation, prosperity in the banking system and economic processes in the economy.

Greetings,

Have a nice day,

Stay healthy,

Dariusz Prokopowicz

Despite institutional and formal independence in periods of economic crises, in periods of economic recession, decline in the economic activity of companies and enterprises, depending on the stage of the economic cycle at which the economy is located (i.e. whether it enters or leaves the economic crisis) and depending on the acceptable level credit risk by commercial banks, it is central banks that conduct a more or less prudent or lenient monetary policy, which may be conducted in correlation with anti-crisis socio-economic, budgetary and fiscal policies coordinated by the government and operationally managed by central state institutions, i.e. the Ministry of Economy and / or the ministry of the treasury, finance, etc. So, despite the formal independence, the efficiently implemented coordination of interventionist, anti-crisis policies, including monetary and budgetary, fiscal, etc., may be an important determinant of the effectiveness of anti-crisis programs and pro-development activities aimed at activating economic activity, counteracting the increase in unemployment and a decline in investments, etc. This type of solution is practiced in periods of economic downturn. Also from the beginning of the development of the SARS-CoV-2 (Covid-19) coronavirus pandemic, i.e. from March 2020, in many countries it is possible to diagnose such a situation of coordinated actions and economic anti-crisis programs.

Best regards,

Dariusz Prokopowicz

It depends on the country and the central bank.

Some central banks are more independent than others.

Dear Michael John McAleer, Chia-Lin Chang,

Yes of course. The level of independence of central banking varies from country to country and it is determined by various factors.

Thank you, Best wishes,

Dariusz Prokopowicz

To Dariusz Prokopowicz :

I am glad we are in agreement.

Dear Michael John McAleer,

I also. Thanks.

Regards,

Dariusz Prokopowicz

Dear Dariusz Prokopowicz :

Thank you for posting an interesting thread.

Dear Chia-Lin Chang,

Thank you for the nice words and I'm glad that the topic is interesting.

Thank you, Greetings,

Dariusz Prokopowicz

Hi. See the following link:

https://www.ru.nl/english/@870175/why-do-we-need/

Dear Aref Wazwaz,

Thanks for the link to the interesting publication entitled: Why do we need independent central banks?

Thank you, Regards,

Dariusz Prokopowicz

In principle, yes, though not always.

Dear Michael John McAleer,

Yes, thanks for the answer on the issue of central banking independence.

Thank you, Best regards,

Dariusz Prokopowicz

Depends entirely on the country and the central bank.

Dear Michael John McAleer,

Yes of course. In individual countries, despite the generally unified formula, there are, however, certain differences in terms of formal and real independence.

Thank you, Regards,

Dariusz Prokopowicz

Does the central bank in your countries invest in equities and does not pursue a transparent information policy in this regard? I am asking because such a situation has existed for several years in the country in which I operate. In addition, the central bank buys huge amounts of treasury bonds, thus providing additional money to finance anti-crisis state aid programs for commercially operating business entities that were launched during the SARS-CoV-2 (Covid-19) coronavirus pandemic. At the same time, the central bank maintains record low interest rates to increase the attractiveness of investing in shares listed on the stock exchange and the issue of the central bank's independence from the government is a big question mark given the issue of filling the position of central bank governor. What about these issues in your countries?

Thank you, Regards,

Dariusz Prokopowicz

Dear Brian Phiri Kampanje,

Yes. Thank you for answering the question:

Is the independence of the central bank from the government full and real now?

I agree with your opinion on this topic. At present, in many countries, the independence of central banks from the government is very limited.

Thank you very much,

Best regards,

Dariusz Prokopowicz

Dear Michael John McAleer,

Yes, that's right. It depends on the specific national systemic conditions of the organization and functioning of the financial system, central banking, formal and informal links between the central bank and the government.

Thank you very much,

Best wishes,

Dariusz Prokopowicz

Dear Mariia Bondarchuk,

Thanks for the answer. Yes, the International Monetary Fund is an international financial institution that supports the economic development of developing countries and helps to ensure the stability of the financial system. In the context of the above-mentioned issues of the independence of central banking in relation to the government, I propose the following research topic: The meaning and role of incomplete independence of central banking in relation to the government in the context of simultaneous lenient monetary policy of central banking and lenient fiscal policy of the Ministry of Finance in the event of implementation of interventionist, anti-crisis economic policy programs in order to reduce the scale economic downturn that occurs cyclically every few years in periods of economic and / or financial crises.

Thank you very much,

Best regards,

Dariusz Prokopowicz

Hereby I would like to propose the following research topic: Information policy of the central bank versus the reputation and credibility of the key financial system security institution. In a situation where the central bank, in its ultra-liberal and mild monetary policy and correlated with the government's economic policy, becomes too deeply involved in political and media issues, it begins to lose its positive image. Currently, in the country in which the president of the central bank operates, i.e. the National Bank of Poland, when seeking re-election, he conducts a kind of "election campaign" in the meanstream, pro-government public media, constantly announcing what patriotic and pro-development activities the central bank plans to implement in the coming years. These promises were already promised, such as direct financing of the armed forces, financing the construction of the first nuclear power plant. In addition, such statements of the NBP president at press conferences that the employees of the central bank defend the economy most patriotically, that the central bank is independent of the government, that NBP analysts may also be wrong, that issues regarding the economy and inflation are extremely complex, etc. NBP from the point of view of international financial institutions. To this should be added a policy of not increasing the financial system's safety reserves, consisting in the fact that every year, almost the entire profit of the central bank is transferred to the state budget burdened with high public debt, instead of supplying the reserves of this bank. In the event of a global economic or financial crisis, the exchange rate of the national currency was declining, and after the economy exited the recession, it did not rise adequately, it did not return to the levels from before the crises. By carrying out non-transparent public transactions on international financial markets, the central bank additionally lowered the value of the domestic currency, and the NBP governor explained at press conferences that it was done on purpose to improve the profitability of exports, not to mention, however, that in this way the central bank generated above-average profits at the end of the year. which was then transferred to the state budget. At the end of 2020, NBP was deliberately weakening the domestic currency in order to generate a greater profit for NBP at the end of the year and for the entire fiscal year 2020. NBP admitted it on Twitter and this post quickly disappeared from Tweeter. The idea was for the greater profit from the NBP to go to the state budget burdened with the budget deficit increased by the Anti-Crisis Shields used. In addition, at the expense of citizens, at the expense of foreign currency borrowers, the central bank in Poland transfers its extraordinary profits generated on speculative transactions on international financial markets to the state budget instead of supplying the central bank's reserves and building a more secure domestic financial system. Are there other examples of this kind of parody in the context of a central bank's monetary policy?

Best regards,

Dariusz Prokopowicz