Central Banking Vs Central Bank

Central banks have never been stronger than now since they play an ultimate role in the growth of economies. Monetary policy is seen as the central tool of macroeconomic stabilization, and in some countries monetary policy is implemented by an independent central bank (Blinder, 1998). According to Singleton (2011), the world central banks have experienced two revolutions in the 1940s and 1980s, respectively. The former indicates that the central banks were less autonomous and were controlled by the governments with regard to the setting and implementation of macroeconomic policy. The latter stage shows the great progress in the notion of CBI, especially in developed countries. In the early time of this stage, a series of industrial countries …show more content…
To do so, making comparison is perhaps one of the best methods to recognize why they are different or similar by nature or by legislation. There have been, however, so far just a few research to make a comparison the central banks among countries. Tache & Danu (2014) conducted a survey on three main central banks, namely the European Central Bank (ECB), the US Federal Reserve (Fed), and the Bank of Japan (BoJ), in three areas that are central banks’ goals, the organizational structures, strategies and tools of monetary policy. The authors concluded three main points as follows: first, ECB is more decentralized than the Fed and the BoJ; second, the main role of central banks is to carry out the monetary policy, but BoJ and ECB 's most key aim is price stability with an exact quantitative target, and this opinion is different to the Fed which focused on qualitative explanations of price stability; and Last, in terms of institutional structures, ECB and the Fed show similarities while BoJ works more …show more content…
The more comprehensive, well-defined, straightforward, and widely recognized in the literature review, however, is a methodology used by Cukierman, Webb, Miller & Neyapti (Crowe & Meade, 2007, p.71). This measure was created in 1992 and had a small revision in 2002. They use this method to measure the independence of the central banks in 72 countries around the world. It is a well-known approach because it can be used for most countries including industrial, transition and developing ones. Because of this, this method is used in this research to figure out the independence of the central bank and its relation to the price stability in Vietnam and New Zealand. Simply, it is called an overall index of inflation-based central bank independence. The summary of this indicator is described underneath