Comments on Harold James's paper "Central banks: between internationalisation and domestic political control"

Harold James’s paper can be summarised as follows: (i) there are historical cycles in central bank independence (and popularity); (ii) there are inherent limitations in the various indicators of independence used in empirical work by economists; the analysis must therefore be integrated with the “examination of the political and social setting within which CBs work” (p 8); (iii) in general, central banks are likely to be more independent in decentralised-federal than in centralised unitary states (pp 9–12), a point previously made, with caveats, by Capie, Goodhart and Schnadt (1994, pp 61–2) and extended by James to international integration. The latter, James argues, shapes an idiosyncratic central bank culture of independence, also by providing insulation from domestic policy. Finally, (iv) European integration provides a case study proving the latter contention.