central bank independence

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Independence of the central bank from immediate short-run control of its aims and operations by the government. This includes independence in personnel issues, such as appointments of board members, and in the choice and control of instruments that affect inflation. Because central banks typically operate on a longer time scale than politicians, an independent central bank is expected to be better for monetary stability, while governments can sometimes be tempted into inflationary policies, for example, by boosting spending and employment or cutting interest rates to gain popularity in the short run.

Subjects: Economics.

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