Keynes on Central Bank Independence

The article examines Keynes'views on central bank independence (CBI), focussing on an essay he published in 1932. After distinguishing the several forms of CBI, we argue that Keynes only favoured some of them, avoiding impairing the role that political institutions must play in deciding the objectives of monetary policy. We assess Keynes'views against the background of the crucial transformations that the Bank of England underwent after WWI and of the Labour Party debates on the integration between CBI and the functioning of democracy. Keynes maintained that CBI must protect monetary policy decisions from the pressures coming from both private and political groups; and added that the separation of competence among elected and non-elected bodies must be supplemented by large communication with the society and by cooperation and coordination among public institutions. Finally, we highlight that Keynes'proposals are relevant for present debates. [Publisher's Text].