Browsing by Subject "Monetary Policy"

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    A TALE OF TWO CENTRAL BANKS: The Importance of Limiting Political Interference with Central Bank Independence
    (2023-05) Cozby, Sarah Gleith
    Both theory and empirical evidence support the idea that more independent central banks have better economic outcomes. The purpose of this paper, presented in two cases, is to examine attempts to interfere with central bank independence and their impact on inflation, currency valuation, and macroeconomic performance by evaluating the policies of Turkey President Tayyip Erdogan and US President Donald Trump. Both Presidents used rhetoric and power over the appointment of officials to attempt to compromise central bank independence. President Erdogan’s success directly led to economic crises, including severe currency devaluation and hyperinflation. The Senate approval process prevented Trump from appointing loyalists to the Federal Reserve Board, and the economy prospered. However, his rhetoric arguably damaged the bank’s credibility and public perception of its independence. Close analysis and comparison of the two cases and their outcomes, particularly the effects on citizens, highlights the continued importance of protecting the central bank’s ability to make decisions free from short-term political influence.