Three Myths about Central Banks

Do central banks control the business cycle? Should price stability be their only monetary policy goal? Do politicians give up a degree of power and gain nothing personally when they grant central banks independence? This Commentary argues that none of these widely held notions is true. The Commentary is based on a speech presented to participants at the conference on the Origins and Evolution of Central Banking, sponsored by the Central Bank Institute of the Federal Reserve Bank of Cleveland, in May 2001.