The Role of Central Bank Independence in a World of Capital Mobility

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The essay explores the interconnected evolution of international capital mobility and central bank independence, highlighting their significance in today's monetary system. It critiques neoliberal models that portray central bank independence as a purely market-driven phenomenon. Instead, it argues that credibility is a social construct that fosters a consensus between political and market interests. Central bank independence serves as a framework for financial actors' expectations and allows governments to navigate market dynamics while maintaining indirect control over policy decisions, underscoring its role in modern financial governance.