On The Relationship Between Central Bank Independence And Inflation Targeting

Inflation targeting has been adopted by an increasing number of developed and developing countries in recent years. Facts have proved that this monetary policy helps to promote the steady economic growth, so attentions are widely paid on this policy and researches are carried out in various ways. The independence of central bank is one of the important factors for the effective execution of inflation targeting. This paper tries to introduce and summarize the academic studies on the relation between central bank independence and inflation targeting, focusing on two well-accepted models to explain that relation. It also applies the models to the current situation of China's central bank independence and proposes related suggestions to improve the situation.This thesis is divided into four chapters. Chapter One introduces the related theories and backgrounds about inflation targeting and central bank independence. First it introduces the background of inflation targeting. Secondly, it describes the theories on which inflation targeting is based and the relations between inflation targeting and central bank independence.Chapter Two introduces two of the popular models on inflation rate and central bank independence. Section One introduces the of Green, John H. (1996), which shows that inflation targeting is conducive to economic growth and the conversion of the expectation of inflation...