CENTRAL BANK INDEPENDENCE AND THE ISSUES OF UNCERTAINTY IN THE IMPLEMENTATION OF MONETARY POLICY: STRENGTHS AND LIMITATIONS, REMEDIES AND PARADOXES

Within the framework of this article, we deal with the primordial role of central bank independence, which constitutes a fundamental institutional element and a sine qua-non condition for the conduct of monetary policy in a framework that tends towards stability and that endangers the framework of uncertainty. The independent central bank theory remedies the framework of temporal inconsistency that integrates central banking and the conduct of monetary policy into the disruptive influence of political power, and emphasizes a stability framework at the central bank that contributes to the credibility of the central bank and allows it to influence the behaviour of economic actors through an efficient expectations channel. Despite the crucial advantages and contributions of the independent central bank theory, however, it has several limitations and drawbacks. In this respect, the theory of central bank governance is presented through its two facets, namely internal and external governance theory, as two institutional instruments that make it possible, on the one hand, to remedy the limitations of the theory of the independent central bank and, on the other hand, to strengthen its contributions and its inescapable assets.