The importance of the independence of Central Banks and an evaluation on the independence of the Central Bank of the Republic of Turkey

Abstract

Central banks are the most efficient institutions for maintaining and sustaining their countries' economic stability. Through their policy instruments, central banks have many functions such as price stability, maintaining the value of national currency, injecting money into economy, maintaining of stability and the development of financial markets, etc. In brief, monetary policy, has a key role for economic process. For performing this function successfully, the idea that central banks should avoid political effect and orientation has lead to an important debate on the independency of central banks. It is important that central banks have legal independence besides their actual sense of the independence. The Central Banks' independence has been provided with the law No. 4651 in Turkey. However it is still a matter of discussion at what level is the independence provided in terms of law. This study examines the importance of central banks and the independence and autonomy of the Central Bank of the Republic of Turkey (CBRT) as to what cases compared to other major central banks. In this study, the author identifies that the legal independence of the CBRT has significant gains in the context of the struggle against inflation and economic stability. On the other hand, it was observed that despite of its legal independence, the CBRT has not yet reached a de facto independence at the level of the central banks of developed countries. In this study, the analysis has been done by utilising several researches about the central banking and the statics of the CBRT and the Turkish Statistical Institute. © 2016 Peter Lang GmbH. All rights reserved.