There have been rapid and substantial changes in the importance, economic power and operation of financial markets over the past three decades. This innovative book examines the control which central banks have over financial markets, focusing on the implications of the current trend towards the granting of 'independence' to central banks. The contributors examine central banking in a number of countries including the G7 group, Italy and New Zealand. They also provide explanations for the evident instabilities of the Exchange Rate Mechanism and offer words of caution for the European Central Bank.A number of the authors challenge the foundations for the growing claims that increased central bank independence will ensure, at no cost, that inflation is both lower and less variable, finding that there are significant employment costs associated with central bank independence. The authors also discuss theoretical issues, including the meaning of, and possibilities for, monetary policy in an endogenous money framework. They go on to examine central banking in a number of countries including the G7 group, Italy and New Zealand. Finally, they also provide explanations for the evident instabilities of the Exchange Rate Mechanism in recent years and offer words of caution for the European Central Bank.

Students and scholars of financial and monetary economics will find this book invaluable as will practitioners in government and central banking.