Central banks: between internationalisation and domestic political control

BIS Working Papers No 327
November 2010


The paper examines the exercise, the efficiency, and the legitimacy of the monetary policy-making process. The goal of central bank autonomy in recent times is the outcome of a demand for price stability. The realisation of autonomy is also a consequence of the fragmentation of national decision making, in federal systems but also in regional and international monetary arrangements. Economic and financial crisis changes the political economy, and produces a transition from seeing the central bank as producing a general or universalisable good (price stability) to interpreting monetary policy as fundamentally a tool for redistributive or factional policies. The latter will only work in the framework of national policy.

JEL Classification: E58, E61, F33, G28, H1, N10, P16

Keywords: central bank independence, central bank governance, monetary policy financial crisis