Central banks and reputation risk

a column by Jon Danielsson for VOX: CEPR’s Policy Portal

As central banks accumulate ever more job functions, their reputation risk increases.

This column offers a cautionary tale from Iceland where, after the central bank was put in charge of capital controls, it was subject to severe attacks because of perceived mistakes in how the capital controls were enforced. The accumulation of powers erodes a central bank’s independence and subjects it to regulatory paralysis.

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