Three Pillars Of Central Bank

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The global financial market has actively changed since the 1990s after experiencing two financial crises in 1997 and 2008, and consequently, the central bank’s features such as structure and functions have altered too, especially its position with the government. To date, central bank’s independence, accountability, and transparency have been seen as three essential pillars of this change. Padayachee (2004) and Crowe & Meade (2008) comment that this is a real revolution in the central bank’s management approach in both industrial and developing countries. In these three pillars, a factor that economists, policymakers, lawyers, and practitioners have been involving the most is independence. The independence mentioned here is the central bank’s …show more content…
However, at the end of the 1990s the economy commenced to face some severe problems such as high unstable inflation and vulnerable financial and banking system. These issues, to some extent, were connected to the responsibility of the State Bank of Vietnam for controlling the monetary policy to fight inflation. Therefore, in the meantime, looking for suitable systems as well as an appropriate central bank model in line with the international standard could be an essential task for Vietnam. Because, generally, Vietnam now is a market-based economy and it has connections to many international organizations, such as the World Bank, the International Monetary Fund, and the Asian Development Bank. Besides that, it is also a member of economic alliances, such as the Association of South East Nations and Trans-Pacific Partnership. It needs, therefore, a sound and powerful central bank not only for driving and operating the monetary policy of the economy but also for integrating into the international financial market. An independent, transparent, and accountable central bank are fundamental requirements for Vietnam in this period, and it is more important when the central bank has autonomy to carry out its primary role efficiently and effectively. The independence of the central …show more content…
Since then, it has been seen as one of few ‘full service’ central banks in the globe (RBNZ, 2009). One of the significant characters is that the RBNZ has been completely autonomous in operation to the government (Singleton, Grimes, Hawke, & Homes, 2006, p.2). Evidently, New Zealand is a developed country, and it had a positive result in central banking management. The way that the RBNZ acts, partially or as a whole, could be a model for many countries around the world since it was one of the first countries to consider and apply central bank independence in practice after reforming the central bank system by the Reserve Bank Act in 1989. The RBNZ, since then, has been evaluated as one of the most independent central banks in the developed countries (Singleton et al., 2006). Before having an independent central bank as it is now, “New Zealand had one of the worse inflation records among OECD countries in the 1970s and 1980s, with annual CPI inflation sometimes above 15 percent” (RBNZ, 2004, p.3). Therefore, studying this central banking model, especially in independence, will bring more benefits to those countries, including Vietnam, which want to make the central bank becomes sounder and more efficient in both academic and practical

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