Central banks should be independent in setting monetary policy but they should also be tasked with monitoring financial market stability under political supervision, the International Monetary Fund’s (IMF) chief economist said.
Olivier Blanchard also told Handelsblatt newspaper’s Friday edition that Germany should take on a stronger role in Europe and needed to invest more rather than focus on saving.
“If there is one lesson to be learned from the crisis, it must be: it’s not enough to keep an eye on monetary stability. We must also look at the stability of the financial system,” Blanchard was quoted as saying.
“(Central bank) independence should be tiered. Classical monetary policy must remain independent. The control of the financial markets by the central bank, however, should be put under some kind of political supervision.”