Commentary Type

Central Bank Independence After the Inflation Is Gone

Adam S. Posen (PIIE)

Speech delivered as part of the Foreign Policy Distinguished Speaker Series and the global conference, "The Changing Politics of Central Banking," held at Cornell University on April 18-19, 2016, and organized by the Einaudi Center in collaboration with Meridian 180 and the Global Finance Initiative.


Thank you Professor Miyazaki for that very generous introduction. Thank you to all of you who came across campus to be here in person instead of watching this on live stream while flipping back and forth to the NBA playoffs.

I am very grateful to Hiro Miyazaki, to Annelise Riles, to Jonathan Kirshner, to Hank Michaelson and everyone involved who included me in this conference. It is indeed an exciting interdisciplinary event. Interdisciplinary is a word that gets tossed around quite a bit. This is one where it actually seems to be real and working and to give various component institutions credit; I'm also very glad and grateful to have the opportunity to be addressing an audience, not just of all the distinguished guests participating in the conference but here at Cornell. Peter Katzenstein is in the audience. Peter's work and the work that Peter inspired and guided through the years has been something I've looked to since the early 80s. And he and Jonathan Kirshner in particular here are leading the kinds of political economy that I am very much in favor of and I'm delighted to be able to speak in front of them even if not for them.

Let me pick up though on something. This is the Mario Einaudi Center. And as I've learned, Mr. Einaudi's father was the governor of the Bank of Italy. So if we're going to talk about central bank independence, why don't we start with the Banco de Italia, which in many ways symbolizes what really goes on with central bank independence. By the way, speaking of independence, you didn’t tell me how long I'm supposed to speak for so I will go indefinitely. Anyway, the Bank of Italy has an interesting history, which I have a small amount of knowledge of, but I won't bore you with. But essentially it has a culture and a role that is common among a number of Central Banks in countries with different economies.

It was the repository of experts in economics and relatively uncorrupt people in a country where many policymakers were either inexpert or expert on corruption. And this took place in a country where for many decades, fiscal policy in particular was seen as very difficult to make in a stable fashion.

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