Central bank independence and monetary policy in the United States, Germany, and France

Abstract

This chapter investigates the origins and development of central banking and the role of monetary policy in three types of market economies: the free market economy, the coordinated market economy, and the hierarchical market economy. The United States, Germany, and France are examples of each of these types of economies. In particular, attention is paid to the evolution of the concept of an independent central bank. In the United States, the discussion about central bank independence centred on finding the right balance between the powers of the states and those of the federal level, and between public and private (banks) interests. The Bundesbank’s high degree of independence was enforced by the public who wanted to shield the central bank against political influences. The French central bank was part of the ministry of finance and thus very dependent. Since 1999, the German and French central banks have been part of the European Central Bank. A separate section is devoted to the question of whether traces of differences in national cultures and economic ideas can be found in the discussions about monetary policy within the ECB.