The Central Bank Independence Analysis Mechanism Of The Effect On The Stability Of The Economic Growth

The central bank system is an important part of the modern banking system. There is a clear understanding about the functions of the central bank from both theoretical and practical aspects. But there are also many arguments in terms of the central bank independence. The emphasis has shifted from whether the central bank should have the independence to what extent of independence should be given to the central bank. Theories about central bank independence are mostly generated during the sharp fluctuations of the economy, because the government always wants to help the economy to recover through expansionary monetary policy. But a large number of theoretical studies have proved that maintaining a high degree of independence of the central bank is conducive to stabilize fluctuations in the economy. The problem is that these theoretical studies produce a variety of empirical results.China’s central bank system established not long time ago, and in face of the recent financial crisis, in order to avoid downturn of the economy, China’s central bank took some rather radical easing monetary policies to fuction with the fiscal policy, while the negative effects of these monetary policies gradually become apparent after the crisis at low tide. As a result, people can not help pondering one question:whether the central bank independence is a useful institutional arrangement for countries with economies in transition? For this reason, we selected six countries in Eastern Europe as the baseline, trying to explore during the economical transition period, whether the central bank independence creates more stable environment for economic growth.This article is divided into six chapters. In the first chapter, a brief cover is made for the development of the central bank system and the central bank independence. In the second chapter, I sort out the theories about central bank independence and the stability of economic growth, and make some comments. The third chapter, the evolution of the arrangement of the main countries with economies in transition is analyzed. While I summarize the relation between the economic fluctuations and the central bank independence in six eastern Europe countries. In Chapter IV, after introducing the microscopic mechanism of economic fluctuations and monetary policy transmission mechanism, the authors constructed the combination of theoretical models from micro to macro level to analyze how central bank independence affect the stability of economic growth. Chapter V, after reasonably selecting the indicator of the central bank independence for six countries in Eastern Europe, an empirical test is made for the central bank independence’s impact on the stability of economic growth, and conduct an in-depth analysis about the results. Finally, in Chapter Ⅵ, some conclusions on the mechanism about how central bank independence impact the economic growth stability are drawn according to the results, and so do some policy recommendations on the construction of China’s central bank system.