Independence of Central Banks: The Need for an Urgent Revamp!

Abstract

<jats:title>Abstract</jats:title><jats:p>Over the last years, independent central banks were often criticized. Many critics felt that the fatal flaw of the current system lied in its independent nature. Some critics argued that the remedy to such problems was to replace independence with interdependence. Such a drastic measure is completely unnecessary. No more time should be lost discussing further the merits or the weaknesses of central bank independence. But taking central bank independence as a given, one should simply try to equip central bankers with the mandates, the tools, and the values best fitted to help them face future shocks. Deeper checks and balances with other institutions and the fair financing of investment by all economic agents, including startups and SMEs, are urgently necessary to head off financial crises that will inevitably arise in this era of growing wealth inequality, disruptive technologies and climate change.</jats:p>

Proposed changes to the Bank Indonesia law as a solution to the impact of the COVID-19 spread on banking in Indonesia

“…The term disturbs the meaning of Bank Indonesia's independence in the existence of the Bank Indonesia Law. In concept, the measure of a central bank's independence is the central bank authority in determining monetary policy (Moutot, 2020). If the proposal removes the Central Bank's Authority in deciding economic policy, then the request is contrary to its independence concept.…”