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An Independent Central Bank and an Independent Monetary Policy: The Role of the Government Budget—The Case of Poland 1924–26
Author(s) -
Makinen Gail E.
Publication year - 2001
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/0275-1100.00034
Subject(s) - disequilibrium , economics , revenue , price of stability , independence (probability theory) , central government , monetary policy , central bank , monetary economics , bank rate , government (linguistics) , financial system , economic policy , finance , local government , medicine , linguistics , statistics , philosophy , mathematics , public administration , political science , ophthalmology
Poland's 1924 stabilization plan created, as measured by contemporary criteria, an independent central bank. The stabilization's success was undermined by a fiscal disequilibrium when a capital levy failed to raise revenue. The Polish government covered the revenue shortfall by exploiting the right of the state to issue subsidiary coins. Although central bank independence was not compromised, Poland did not have an independent monetary policy. When the fiscal disequilibrium was corrected in 1926, the central bank gained complete control over monetary policy. Thus, a balanced budget may be more important to achieving price stability than arrangements to foster central bank independence.