Public trust and central banking

Abstract

Central bank independence is one of the most remarkable pieces of institutional architecture fostered by economic thinking in the last half century. Theoretical studies in the 1980s stressed central bank independence as a precondition to bringing inflation under lasting control, and support for reform soon spread from academia to policymaking. Professor Kenneth Rogoff was a major contributor to this process, so we are privileged to have him as keynote speaker at this Conference. Central bank independence delivered upon expectations. As the countries with independent central banks grew to nearly 70 in recent years, average world inflation dropped to 4%, from more than 25% 30 years ago. Empirical studies are pretty conclusive on a strong correlation between central bank independence and low and stable inflation after controlling for other variables.