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THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 1
CONTENTS
I. INTRODUCTION ............................................................................................................................................................................. 2
II. ORGANIZATIONAL CHART OF THE CBL ............................................................................................................................... 4
II. ELEMENTS OF THE CBL ORGANIZATIONAL CHART AND THEIR FUNCTIONS ................................................ 5
III. CENTRAL BANK OF LIBERIA AS A FISCAL AGENT OF THE GOVERNMENT .................................................... 13
IV. CENTRAL BANK OF LIBERIA MONETARY POLICY FUNCTIONS ......................................................................... 14
V. THE INSTRUMENTS OF MONETARY POLICY ............................................................................................................. 16
VI. FUNCTIONS OF THE CENTRAL BANK OF LIBERIA ................................................................................................... 19
VII. THE CONCEPT OF INDEPENDENCE OF THE CBL ..................................................................................................... 22
VIII. AREAS IN WHICH THE CBL MUST BE ALLOWED TO ENJOY ITS INDEPENDENT ......................................... 22
IX. WHY CBL INDEPENDENCE IS NECESSARY ................................................................................................................ 23
THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 2
I. INTRODUCTION
The Central bank of Liberia is the institution responsible for the management of the state’s currency, its money supply and interest rates.
It also possesses a monopoly on increasing the money base as well as printing the country’s currency.
The Central bank of Liberia was established on October 18, 1999 by an Act of the national legislature of the Republic of Liberia. It became
functional in 2000 and succeeded the national bank of Liberia with Mr. Elie E. Saleeby serving as its first Executive Governor.
This paper presents the most recent organizational chat of the Bank with detailed discussion on the functions and mandate of the individual
departments and sections.
The paper also comprehensively deliberated the fiscal agency and monetary policy functions of the Central Bank that is, those roles and
functions the CBL performed on behalf of the government of Liberia along with the details on the monetary policy tools used by the CBL.
In further discussions, the paper highlighted the Central Bank of Liberia’s delegated authorities. That is, those authorities that the National
legislature has delegated to the CBL.
In its climaxing stage, the paper further elaborated on the concept of Independence as it relates to the Central Bank. The paper clearly
expounded what exactly a Central Bank independence means, with detailed explanation of areas in which the Central bank must be allowed
to enjoy its independent and why the independent of the Central Bank is deem necessary.
THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 4
II. ORGANIZATIONAL
CHART OF THE CBL
CENTRAL BANK OF LIBERIA
Deputy Governor
(Economic Policy)
External Relations Executive
Governor Internal Auditor
Board of
Governors
Deputy Governor
(Operations)
Research
Policy &
Planning
Deptmt
Banking
relation
&
Supervisi
on
Deptmt
Mainten
ance &
Financial
Inclusion
unit
Treasury
Operatio
n unit
Legal
Departm
ent
Administr
ation
Deptmt
Banking
Deptmt
Finance
Deptmt
Mgmt
Informatio
n System
unit
Payment
s System
unit
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PRECIOUS KERME GAYAN 5
II. ELEMENTS OF THE CBL ORGANIZATIONAL CHART AND THEIR
FUNCTIONS
1. The Board of Governor
The power of the Central Bank is vested in the board of governors who are responsible for
formulation and implementation of policy. The board consist of five (5) governors. The Board of
Governor of the Central Bank of Liberia are responsible for:
Determining the policy of the Bank, other than the formulation of monetary policy;
Determining the objectives of the Bank, including oversight for its financial management
and strategy;
Keeping under constant review the performance of the Bank in carrying out its functions;
Keeping under constant review the performance of the Governor in discharging the
responsibility of that office;
Keeping under constant review the performance of the Governor in ensuring that the Bank
achieves its Objectives;
Determining whether the policy statements made are consistent with the Bank’s primary
function and policy objectives of the Bank
Keeping under constant review the use of Bank’s resources.
2. Executive Governor
The management of the Central Bank is conducted by the Executive Governor who is also the
Chairman of the Board of Governors of the Central Bank. The executive governor serves as the
Chief Executive Officer of the Central Bank, and is responsible to the Board of Governors for the
THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 6
implementation of its policy and is in charge of the day-to-day management of the Central bank.
The executive governor also have the powers to act, contact and sign instruments and documents,
for and on behalf of the Central bank.
3. Internal Audit
The Internal Audit Department remained focus to the provision of independent, purposeful
assurance and advisory services designed to enhance the Bank’s operations. It is responsible to
perform pre-audit procedures on all transactions involving telex or Swift transfers or instructions
to debit the accounts of the bank with commercial banks, continuously ensure the proper
functioning of computer security system, particularly with regard to code numbers and security
levels, which control access to documents and execution of financial transfers through the
computer. They are also responsible to perform post-audit procedures on expenditures of the Head
office and branches and report to the board and the Governor any violations to provisions of the
Law or the Bank's rules and regulations, in such respect. Audit the Bank's holdings and stock of
currency notes; coins and gold, as well as operations relating to the receipt of currency notes from
printing and houses, in accordance with the instructions issued in such respect and participate in
the annual stock-taking of the Bank's assets.
4. External Relations
This department is responsible to maintain a cordial working relationship with its traditional
multilateral partners including the International Monetary Fund (IMF), World Bank and the
African Development Bank. Which includes holding regular meetings, consultations on policy
matters relative to financial and macroeconomic developments in the economy, benefiting from
trainings and technical assistance as well as exchanging data. This department is also responsible
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PRECIOUS KERME GAYAN 7
to provide good and close working relationship with sub-regional and regional institutions such as
the West African Monetary Institute (WAMI), West African Monetary Agency (WAMA), West
African Institute for Financial and Economic Management (WAIFEM) and the Association of
African Central Banks (AACB).
i. International Monetary Fund
The CBL continued its engagement with the IMF at the level of policy consultation, technical
assistance, memorandum of understanding and the request for waiver and modification of non-
observance of performance criterion under the Extended Credit Facility Arrangement (ECF). The
IMF also continued its technical assistance to the CBL in areas of capacity development, helping
with the improvement of the quality of research, compilation of monetary and liquidity forecasting,
price, and balance of payments statistics as well as financial soundness indicators, capital market
development and the insurance sector.
ii. The World Bank
The CBL also continued its engagement with the World Bank Group’s institutions, the
International Finance Company (IFC) and the FIRST Initiative in areas of financial system reform
including support to the establishment of a collateral registry and development of the capital
market. The Bank also remains a key development partner of the Government in the provision of
financial support to ongoing infrastructure projects, especially electricity and road.
5. Legal Services
The Legal Department is responsible for providing legal advice and support to the CBL
management towards the implementation of their functions relative to the CBL achievement of the
monetary policy objective of Liberia, including strengthening the legal and regulatory framework
in the country.
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PRECIOUS KERME GAYAN 8
6. Administrative Department
The Administration Department provides the tools necessary for a productive working
environment, facilitating the functions of each department and the duties of each individual.
The Administration Department performs these core functions:
Procures supplies and conducts stock-taking exercises
Maintains the Bank’s records management system
Disseminates information produced by the Bank
Manages the Bank’s collectible coin operations
Maintains the Bank’s facilities, plant and equipment
Provides reprographic services to the Bank
Coordinates meetings and conferences
7. Deputy Governor (Economic Policy)
The Deputy Governor serve as the principal assistant to the Executive Governor and exercise the
powers and duties of that office. This governor is responsible for analyzing and reporting on
current and prospective economic developments in the Liberia and world economies and assisting
in the determination of appropriate economic policies. This governor superintends over the
Economic Policy Directorate, comprising the Research policy and planning department, banking
regulation and supervision department, Microfinance and financial inclusion unit and Treasury
operations.
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PRECIOUS KERME GAYAN 9
8. Research Policy and Planning Department
The Research, Policy and Planning Department (RPPD) of the CBL is responsible to provide
technical and analytical reports aimed at informing policy decision-making for monetary policy
management during the year. This department is also responsible to collaborate the CBL with
institutions and partners at the national, regional and global levels relative to policy harmonization
and coordination. The Department provides regular updates to senior management on
macroeconomic developments including exchange rate movements, inflation dynamics, GDP
growth, and the balance of payments situation.
9. Banking Relation and Supervision Department
This department is responsible for setup secured transaction regimes and collateral registries across
the world and how to facilitate access to credit by micro, small and medium enterprises, promote
good business practices and market conduct in the financial system, and enhance consumer
confidence in the system. The department is also responsible to ensure commercial banks to
adequately educate and inform consumers about their new products and services, as a means of
empowering the public and consumers to make informed decisions.
10. Maintenance and Financial Inclusion Department
Financial inclusion and development role of the Central Bank includes formulating policies to
make credit available to productive sectors of the economy including rural and Micro, Small and
Medium Enterprises (MSME) sectors. Promoting financial education and financial literacy are the
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PRECIOUS KERME GAYAN 10
current focus of the function and encapsulates the renewed national focus on Financial Inclusion.
The functions of the Department in brief are:
To formulate macro policy to strengthen credit flow to the priority sectors
To ensure that priority sector lending becomes a tool for banks to capture untapped
business opportunities among financially excluded sections of the society
To step up credit flow to MSME sector.
To strengthen institutional arrangement, such as, state level bankers committee and Lead
Bank Scheme to facilitate these objectives
11. Treasury Operation Unit
This department is responsible for the day-to-day management of the Central Bank's reserves.
These reserves are the counterpart of commercial banks' reserve requirements, currency in
circulation, the issuance of Liberian dollar denominated Certificates of Deposit, and capital
reserves and permanent deposits from the government. It ensures that the liquidity position of the
bank is sound, facilitates the investment decisions for surplus cash in the bank and determine the
exchange rate for foreign currencies against the local currency
12. Deputy Governor (Operations)
Also serve as the principal assistant to the Executive Governor and exercise the powers and duties
of that office. This governor superintends over the banking department, finance department,
management information system unit and the payments system unit. This governor is responsible
for driving the industry-wide shared services initiative towards achieving efficient banking
services with cost savings for the Liberian banking industry and greater penetration of banking
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PRECIOUS KERME GAYAN 11
services. This governor is also responsible to equally provides strategic direction and supervises
the four departments of the Central Bank of Liberia that he/she supervises.
13. Banking Department
This department is responsible to collaborate closely with the Liberia Revenue Authority (LRA)
to increase the number of revenue collection windows in Monrovia and its environs. This
department is also responsible to collect on behalf of the Government of Liberia, taxes, fees and
fines on a real time basis for immediate posting to the consolidated Revenue Account, thereby
maximizing the general revenue collection Payment Systems Modernization Project Report
Underway, standardized all CBL checks issued by the bank to its customers (Government
Ministries, Sectorial Agencies and Commercial Banks), which entailed the printing of MICR
coded images readable during scanning process by a specialized scanner. The Clearing House
process was also automated during the year, which will help facilitate reduction of the clearing
cycle when it goes live.
14. Finance Department
This department is responsible to prepare the CBL’s financial statements in accordance with
International Financial Reporting Standards (IFRS). The financial statements are usually audited
by PricewaterhouseCoopers-Ghana, the Bank’s external auditor. The statutory audit is conducted
in schedule consistent with the provisions of Section 50 of the CBL Act.
15. Management Information System Unit
MIS was the focal point for the infrastructure upgrade and implementation of the Payment
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PRECIOUS KERME GAYAN 12
System project. The Management Information System (MIS) studies manual systems in the Central
Bank and the feasibility of their automation. The IT Division carries out Software evaluation and
it develops programs required for automation, in addition to the identification of the equipment
needed, in this respect. Other tasks include:
Develop and update structural designs for data-files or database systems, and explain the
manner in which database files may be utilized.
Provide training and relevant technical assistance to users of computer systems in the
Central Bank.
Provide council and technical advice to the Central Bank's management on automation and
systems.
Perform procedures relating to hardware installation, determine specifications, maintain
and monitor functioning thereof.
Operate systems and application software.
Effectively manage telecommunication network operations within the security, and protect
measures prescribed for such operations.
16. Payment system Unit
This department is responsible for implementing series of reform initiatives aimed at modernizing
the payments system in the country in line with international standards. The key solution
components of the modernization include Real-time Gross Settlement System (RTGS), Scriples
Securities Settlement System (SSSS), Automated Check Processing (ACP) and Automated
Clearing House (ACH) system. The unit is also responsible to upgrade the country's financial
infrastructure to a level of other countries in the sub-region like Ghana and Nigeria in preparation
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PRECIOUS KERME GAYAN 13
for the launch of a single currency in the region. This helps to enhance the countries' participation
in intra-regional trade and commerce.
III. CENTRAL BANK OF LIBERIA AS A FISCAL AGENT OF THE
GOVERNMENT
The Central Bank acts as a fiscal agent for the government by holding the Treasury Deposit
Account (TDA) and central governmental agency deposit accounts, and undertaking the issuance,
registration, redemption, and interest payment of central government bonds and treasury bills.
Managing the Treasury Deposit Account
The Bank manages the TDA on behalf of the Ministry of Finance (MFDP), processing receipts
and disbursements of the central government. The Bank delegates the handling of treasury
transactions to the nine financial institutions and their various branches.
Handling Central Government Agency Deposits
Central government agencies are required to make their deposits with the Bank or other delegated
banks subject to the approval of the MFDP. However, the delegated banks are required by law to
redeposit a certain percentage of the deposits with the Bank, except thosein interest-bearing
accounts.
Managing Central Government Bonds
As a fiscal agent, the Bank, on behalf of the MFDP, performs services related to the issuance,
registration, transfer, redemption, and interest payment of central government bonds. The Bank
also conducts the auctions of central government bonds.
THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 14
Managing Treasury Bills
Treasury bills are sold at discounts through auctions. Participants include banks, investment trusts,
insurance companies and bills finance companies.
IV. CENTRAL BANK OF LIBERIA MONETARY POLICY FUNCTIONS
Issuance of Legal Tender Currency Notes and coins
The Central Bank of Liberia engages in currency issuance and distribution within the economy.
The Bank have the sole right to issue banknotes and coins in Liberia. In Liberia, no person other
than the Central Bank have the right to issue coins, banknotes, or any documents or tokens payable
to bearer on demand having the appearance of or purporting to be Liberian currency without the
prior approval of the Central Bank, neither do any person other than the Central Bank have the
right to issue commemorative coins of Liberia without the approval of the Central Bank.
Maintenance of Liberia’s External Reserves
In order to safeguard the international value of the legal tender currency, the CBL is actively
involved in the management of the country’s debt and foreign exchange.
Debt Management
In addition to its function of mobilizing funds for the government, the CBL in the past managed
its domestic debt and services external debt on the advice of the Ministry of Finance for
Development Planning. On the domestic front, the Bank advises the government as to the timing
and size of new debt instruments, advertises for public subscription to new issues, collects
THE CENTRAL BANK OF LIBERIA
PRECIOUS KERME GAYAN 15
proceeds of issues for and on behalf of the government, and sensitizes the Government on the
implications of the size of debt and budget deficit, among others. On external debt service, the
CBL also cooperates with other agencies to manage the country’s debt.
Foreign Exchange Management
Foreign Exchange management involves the acquisition and deployment of foreign exchange
resources in order to reduce the destabilizing effects of short-term capital flows in the economy.
The CBL monitors the use of scarce foreign exchange resources to ensure that foreign exchange
disbursements and utilization are in line with economic priorities and within the annual foreign
exchange budget in order to ensure available balance of payments position as well as the stability
of the Liberian Dollar.
Promotion and Maintenance of Monetary Stability and a Sound and Efficient
Financial System
The effectiveness of any central bank in executing its functions hinges crucially on its ability to
promote monetary stability. Price stability is indispensable for money to perform its role of
medium exchange, store of value, standard of deferred payments and unit of account. Attainment
of monetary stability rests on a central bank’s ability to evolve effective monetary policy and to
implement it effectively.
Banker and Financial Adviser to the Government.
The CBL as banker to the Federal government undertakes most of government banking
businesses within and outside the country. The Bank also provides banking services to the state
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and local governments and may act as banker to institutions, funds or corporation set up by the
governments. The CBL also finances government in period of temporary budget shortfalls
through Ways and Means Advances subject to limits imposed by law. As financial adviser to the
government, the Bank advises on the nature and size of government debt instruments to be
issued, while it acts as the issuing house on behalf of government for the short, medium and
long-term debt instruments.
Banker and Lender of Last Resort to Banks
The CBL maintains current account for deposit money banks. It also provides clearing house
facilities through which instruments from the banks are processed and settled. Similarly, it
undertakes trade finance functions on behalf of banks’ customers. It also provides temporary
accommodation to banks in the performance of its functions as lender of last resort.
V. THE INSTRUMENTS OF MONETARY POLICY
Fiduciary or paper money is issued by the Central Bank on the basis of computation of estimated
demand for cash. Monetary policy guides the Central Bank’s supply of money in order to achieve
the objectives of price stability (or low inflation rate), full employment, and growth in aggregate
income. This is necessary because money is a medium of exchange and changes in its demand
relative to supply, necessitate spending adjustments. The commonly used instruments are
discussed below.
Reserve Requirement
The Central Bank may require Deposit Money Banks to hold a fraction (or a combination) of their
deposit liabilities (reserves) as vault cash and or deposits with it. Fractional reserve limits the
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amount of loans banks can make to the domestic economy and thus limit the supply of money. The
assumption is that Deposit Money Banks generally maintain a stable relationship between their
reserve holdings and the amount of credit they extend to the public.
Open Market Operations
The Central Bank buys or sells (on behalf of the Fiscal Authorities) securities to the banking and
non-banking public (that is in the open market). One such security is Treasury Bills. When the
Central Bank sells securities, it reduces the supply of reserves and when it buys securities-by
redeeming them-it increases the supply of reserves to the Deposit Money Banks, thus affecting the
supply of money.
Lending by the Central Bank
The Central Bank sometimes provide credit to Deposit Money Banks, thus affecting the level of
reserves and hence the monetary base.
Interest Rate
The Central Bank lends to financially sound Deposit Money Banks at a most favorable rate of
interest, called the minimum rediscount rate (MRR). The MRR sets the floor for the interest rate
regime in the money market and thereby affects the supply of credit, the supply of savings and the
supply of investment.
Direct Credit Control
The Central Bank can direct Deposit Money Banks on the maximum percentage or amount of
loans (credit ceilings) to different economic sectors or activities, interest rate caps, liquid asset
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ratio and issue credit guarantee to preferred loans. In this way the available savings is allocated
and investment directed in particular directions.
Moral Suasion
The Central Bank issues licenses or operating permit to Deposit Money Banks and also regulates
the operation of the banking system. It can, from this advantage, persuade banks to follow certain
paths such as credit restraint or expansion, increased savings mobilization and promotion of
exports through financial support, which otherwise they may not do, on the basis of their risk/return
assessment.
Prudential Guidelines
The Central Bank may in writing require the Deposit Money Banks to exercise particular care in
their operations in order that specified outcomes are realized. Key elements of prudential
guidelines remove some discretion from bank management and replace it with rules in decision
making.
Exchange Rate
The balance of payments can be in deficit or in surplus and each of these affect the monetary base,
and hence the money supply in one direction or the other. By selling or buying foreign exchange,
the Central Bank ensures that the exchange rate is at levels that do not affect domestic money
supply in undesired direction, through the balance of payments and the real exchange rate. The
real exchange rate when misaligned affects the current account balance because of its impact on
external competitiveness.
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VI. FUNCTIONS OF THE CENTRAL BANK OF LIBERIA
According to the CBL act of 1999, the CBL is have the functional independence, power and authority
to:
Issue legal tender banknotes and coins
Legal tender signifies the currency designated by law that a debtor may offer and a creditor is
obligated to accept in the settlement of financial obligations. The CBL has the power to issue
banknotes and coins that are used for the settlement of all debts; public and private, public charges,
taxes, duties, and dues.
Administer the currency laws and regulate the supply of money
Money Supply is the amount of money freely circulating in an economy. The CBL money supply is
made up of currency (paper bills and coins) and bank deposits. Money supply is an important aspect
of government monetary policy. Governments use monetary policy, along with fiscal policy (which
is concerned with taxation and spending), to maintain economic growth, high employment, and low
inflation.
By far the most important function of the CBL is controlling the nation’s money supply and the
overall availability of credit in the economy. It can increase the supply of money and the availability
of credit by lowering the percentage of deposits that banks must hold as reserves at the Federal
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PRECIOUS KERME GAYAN 20
Reserve System, by lowering the discount rate, or by purchasing government bonds through open
market operations. The Federal Reserve System can decrease the supply of money and the
availability of credit by raising reserve ratios, raising the discount rate, or by selling government
bonds.
Provide credit to bank- financial institutions on a discretionary basis
The CBL provides credits to commercial banks to meet their short-term liquidity needs as lender of
last resort. The interest is set at a punitive rate to encourage banks to manage their liquidity
efficiently.
Act as fiscal agent for the Government
The CBL act a banker, fiscal agent and adviser to the government. As banker to the government, the
central bank keeps the deposits of the government and makes payments on behalf of the government.
But it does not pay interest on government deposits. It buys and sells foreign currencies on behalf of
the government.
Administer the New Financial Institutions Act of 1999 and regulate banking
activities;
The CBL direct the new financial act which provides that in order to establish a financial institution
in Liberia, a license must be issued by the Central Bank of Liberia; it also covers the capital
requirement and disclosure (due diligence) reports that must be submitted.
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PRECIOUS KERME GAYAN 21
Hold and manage the foreign exchange reserves of Liberia, including gold;
The CBL keeps and manages the foreign exchange reserves of the country. It is an official reservoir
of gold and foreign currencies. It sells gold at fixed prices to the monetary authorities of other
countries. It also buys and sells foreign currencies at international prices.
Advise the Government on financial and economic matters
The central bank also advises the government on such economic and money matters as controlling
inflation or deflation, devaluation or revaluation of the currency, deficit financing, balance of
payments, etc.
Conduct foreign exchange operations
The CBL fixes the exchange rates of the domestic currency in terms of foreign currencies. It holds
these rates within narrow limits in keeping with its obligations as a member of the International
Monetary Fund and tries to bring stability in foreign exchange rates. Further, it manages exchange
control operations by supplying foreign currencies to importers and persons visiting foreign
countries on business, studies, etc.
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Play an active role in collaboration with bank-financial institutions in the creation
and maintenance of efficient and safe mechanisms for payments, clearing and
settlements to meet the needs of the financial markets, commerce, government
agencies and the general public.
As bankers’ bank, the central bank acts as a clearing house for transfer and settlement of mutual
claims of commercial banks. Since the central bank holds reserves of commercial banks, it transfers
funds from one bank to other banks to facilitate clearing of checks. This is done by making transfer
entries in their accounts on the principle of book-keeping.
VII. THE CONCEPT OF INDEPENDENCE OF THE CBL
Independence in the context of a Central bank is usually defined as the central bank's operational
and management independence from the government. Central Bank independence argues that a
Central Bank which is too susceptible to political direction or pressure may encourage economic
cycle as politicians may be tempted to boost economic activity in advance of an election, to the
detriment of the long-term health of the economy and the country.
VIII. AREAS IN WHICH THE CBL MUST BE ALLOWED TO ENJOY ITS
INDEPENDENT
Legal independence
The independence of the Central Bank is enshrined in law. In almost all cases the central bank is
accountable at some level to government officials, either through a government minister or directly
to a legislature. Even defining degrees of legal independence has proven to be a challenge since
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legislation typically provides only a framework within which the government and the Central Bank
work out their relationship.
Goal independence
The central bank has the right to set its own policy goals, whether inflation targeting, control of
the money supply, or maintaining a fixed exchange rate. The setting of common goals by the
Central Bank and the government helps to avoid situations where monetary and fiscal policy are
in conflict; a policy combination that is clearly sub-optimal.
Operational independence
The Central Bank has the independence to determine the best way of achieving its policy goals,
including the types of instruments used and the timing of their use. This is the most common form
of central bank independence.
Management independence
The central bank has the authority to run its own operations (appointing staff, setting budgets, and
so on.) without excessive involvement of the government. The other forms of independence are
not possible unless the central bank has a significant degree of management independence. If a
government is in the habit of appointing and replacing the governor frequently, it clearly has the
capacity to micro-manage the central bank through its choice of governors.
IX. WHY CBL INDEPENDENCE IS NECESSARY
It is easy to understand why Central Bank independence is essential in modern monetary systems.
In a paper-money regime like Liberia, where government liabilities represent means of payment
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and have purchasing power, there is always the temptation for any government to use such money
in an opportunistic manner. The temptation comes from the fact that money creation has positive
effects in the short term, on growth and employment, while the costs, in terms of higher inflation,
are paid over the medium to longer term. Central Bank independence is a way to protect policy
makers against the temptation of using monetary policy in a distortionary way. The Central Bank
independence also bring about lower inflation, which ensures a more stable environment for
economic and employment growth.
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