An Overview Of Taiwan Central Bank's Independence, Accountability Transparency And Operation Mechanism Of Monetary Policy

With the more impacts on the economics in the world from the shocks ofsubprime-mortgage in America, many policies were proposed from every government tomake the economic return the normal situation. For strengthening the effects of thesepolicies, many central banks announced to cut the key prime rate. Because they wish couldlighten the enterprises and consumers costs of the capital by these policies, and then makethem increasing the desires of the investments and consumptions to let the whole economicsituations back to good ones. However, whether the monetary policies really have theeffects or not, it depends on many elements, including if the central bank eliminates theexpectations of inflation of the public or not, the monetary transmission channels couldwork successfully or not, the central bank could control the key economic variables or notand others seriously. Nevertheless, the monetary policy mechanism of this country, thelevel of independence, accountability and transparency of the central bank are the keyfactors that could influence these conditions work valid or not.In Taiwan, The Central Bank of China Act was re-established in1997. This law wasonly slightly amend and revised few articles in2002. However, these provisions were notbeing considered how to make affirm the independence position of the central bank, andhow to improve the accountability and transparency of the central bank to make the CBCmeet the conditions of the modern central bank. Beside this, in the difficult status of theblurred definition of the money and of weakly effectiveness of the monetary policy in themonetary targeting framework, whether the CBC which still adopts the monetary targetingto be the main monetary policy mechanism has any choices to break these problems or not?Whether the CBC needs to follow the advanced countries to alter the monetary policymechanism to the inflation targeting framework? Whether the CBC could get more benefits to adopt the inflation targeting? And whether the CBC could meet all thepreconditions of the inflation targeting? These issues are so important but not to bediscussed in domestic academic literatures. Therefore we want to review the level of theindependence, accountability and transparency of the CBC and other economic conditionsto see the problems of the monetary policy mechanism in Taiwan. And then, we willprovide the feasible suggestions to these problems to improve our monetary policyeffectiveness.The purpose of this study is comprehensive review of the operating mechanisms ofmonetary policy in Taiwan and through the basis theories of the Central Bank quantitativeindicators, which is comparison and analysis of twenty-four countries and regions. As theCBC can change the organizational structure, improve the appointment of qualifieddirectors, giving the final decision of the central bank monetary policy, avoid the deficitand improve the central bank independence, priority of monetary targets by Central BankAct, regularly published review of policy implementation and future direction of monetarypolicy and to the general public to understand the formation of CBC. On the monetarypolicy measures to enhance the powers and responsibilities of the CBC by the central bankinformation disclosure mechanism to improve the CBC to the public and management ofeconomic policy measures are expected Taiwan's CBC to improve the transparency. Theindependence, responsibility and transparency of the Taiwan Central Bank is on the basisof the inflation target for the mechanism (Inflation Targeting; IT), it is applicable to Taiwanregion analysis and quantitative evidence. The conclusion of studying is that Taiwanshould abandon the MT (Monetary Targeting; MT) mechanism that is diverted from theSMI to DMI, the ultimate policy objective is to adopt and implement the currently widelyused around the world with remarkable results and execution of the IT mechanism.