Journals Proceedings

Abstract

Economic policy is a mechanism that actualizes countries’ development targets. Monetary policy is the most effectual instrument of economic policy. Central banks are of prime importance in monetary policy implementations. Central banks must necessarily be independent in performing essential tasks such as price stability. There are some various criteria for FED’s independency. The criterion that the members of the Board of Governors are co-opted for 14 years of service is an important issue for both the independency and stability of monetary policy. There are various global power groups affecting all central banks around the world. Among the groups are local powers, political powers, pressures from the state system and economic bodies, and international political and economic pressures. FED appears as an independent institution at first glance. However, its relationships with the Government and Congress point to the exact opposite. The Congress makes FED’s legal regulations and suppresses FED indirectly via financial issues if dissatisfied with FED’s monetary policy. Legal regulations handicap the execution of monetary policy directly and threaten FED’s independency.