VI Legal Infrastructure: Central Bank Autonomy
Author:
Jean-Pierre Briffaut https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. George Iden
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Mr. Peter C. Hayward
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Mr. Tonny Lybek
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Mr. Hassanali Mehran
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Mr. Piero Ugolini
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Mr. Stephen M Swaray
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Language:
English
Print Publication Date:
01 Oct 1998
Keywords:
OP; central bank; government; market; payment; monetary policy; unmitigated desire; government report; government policy; government representation; government director; Central bank autonomy; Price stabilization; Exchange rate policy; Central bank accountability; Sub-Saharan Africa; Africa

Abstract

A key requirement for the development of the financial sector is an institutional environment that is conducive to the effective and efficient formulation and implementation of monetary policy. The regulatory and operating frameworks within which financial systems operate must be simple, unambiguous, transparent, and sound. With regard to the regulatory framework, the legislations governing the conduct of banking business must follow sound principles. Given that the central bank acts as the nucleus of the financial system, the central bank law, particularly, needs to be clear and precise and must support the development of the financial sector. Specifically, the law should be clear about the primary objective of monetary policy and how to achieve it. On the basis of a growing body of empirical evidence, it is now generally accepted that the primary objective of monetary policy should be price stability and that authority over the pursuit of this objective should be conferred on an autonomous central bank.13 If the authority over monetary policy, and in particular its implementation, is delegated to an autonomous central bank having sufficient authority to pursue price stability, uncertainties about price signals are minimized as the signals become more reliable. Not only will this lower inflation and keep it from rising again, but it will also help in allocating resources efficiently, leading to high and sustainable output of goods and services. The question then is, to what extent have sub-Saharan African countries been able to meet the requirements of an institutional framework that is conducive to financial sector development?

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Cover Financial Sector Development in Sub-Saharan African Countries
Financial Sector Development in Sub-Saharan African Countries
ISBN:
9781557757586
ISSN:
0251-6365
Publication Date:
01 Oct 1998
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557757586.084
Pages:
115

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