The Independence of the Central Bank and the Effectiveness of the Monetary Policy

For the leading countries in transformation, an extremely important thing is their accession to the European Union and the cooperation of their central banks with the Bank for International Settlements, first of all in the area of the banking sector supervision and the transparency of regulations. In the EU countries, the cooperation between the central banks and the governments is based rather on the many years. practices of mutual understanding among the country.s economic elites than on defined legal regulations. In the circumstances of systemic transformation taking place at present in Poland, where such practices have not yet fully developed, there is need for legislative setting of the forms of such cooperation in order to establish a proper mutual interdependence between the activities of the parliament, the government, and the central bank.

The National Bank.s of Poland independence from the government and its agencies does not mean lack of cooperation between those institutions. On the contrary, the correctness and effectiveness of the monetary policy, on the one hand, and the government.s economic policy, on the other hand, are conditioned by their close cooperation, both at the stage of work on policy documents and in the course of their realization.

In addition, as shown by the evidence of many countries, an independent central bank has, in comparison with a bank subordinated to the government, much greater potentialities for gaining general confidence and high credibility among the population, which largely facilitates the creation of a sound and effective monetary policy.