Question

An Independent Central Bank

· Why is it important for the central bank to have both autonomy and accountability?  (Note: autonomy is defined as “freedom from external control or influence; independence.)

·         Do you think that the United States Federal Reserve has too much power and influence over our economy? Why or why not?

The Federal Reserve Board

·         Review the biographies of each of the seven members of the Board of Governors. What can you say about the composition of the Board with regard to age, gender, education, previous employment, and ethnic background?

·         Which Board members are near the ends of their terms? Why might this have significance?

Answer 1

1) An autonomous and accountable central bank can assist in preventing the undue influence that adversely impacts the financial sector. The degree of autonomy delegated to the central bank have it's impact on the design of the structure of the governing bodies as well as the provisions in accountability. Thus strong accountability provisions are required with increased autonomy to ensure that the delegated authority to the central bank is actually used as intended and is not misused. Therefore it is vital for the central bank to have both autonomy and accountability