International Political Economy

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Even if it is asserted that such a body will remain independent from the other branches of government , the nature of democracy and the system of checks and balances will always mean that there will be a certain form of control that will be exerted over the central bank While an independent central bank can be created to provide independent monetary policies aimed at improving social welfare , the mere fact that its creation is done through political machinery will already place politics within the functions of such an independent body

It is therefore impossible to assume that an independent central bank can be effectively created to implement efficient social welfare policies The second problem with this approach lies in the fact that even assuming that such a body can be created the problem of creating sound monetary policies without political intervention becomes a problem

While there have been certain models and studies that support this argument , it must , however , be submitted that this assertion can be problematic in a number of ways First off , to argue that the establishment of independent central banks will necessarily remove the influence of politics from the monetary policy making is to ignore the fact that any institution as important as a central bank can be effectively made an independent body

Paper Topic: International Political Economy The state-centered approach to monetary politics asserts that independent central banks enhance social welfare by taking monetary policy out of politics

Each department is specialized in its tasks and they often consult or collaborate with one another in to implement the policies that are solely within their jurisdiction In the same vein , by implementing an independent central bank , the assumption must be that social welfare alone is an issue that does not involve other considerations

The system of checks and balances , as mentioned earlier , plays a crucial role in this and may eventually lead to the politicizing of the monetary policies of even the most independent ‘ of bodies

The problem with this is that while a sound monetary policy can be created it cannot be successfully implemented without the help of the other branches or departments of the government

It is an axiomatic principle in political science that all government chartered or created bodies will invariably be influenced by politics to a certain degree

It is basically argued under this approach that a more effective mechanism for social welfare improvement can be implemented by removing from the whimsical and sometimes arbitrary nature of politics the determination of certain fiscal and monetary policies

Discuss two ways in which this assertion is problematic The state-centered approach has been hailed as the solution to the problem of enhancing social welfare

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