And the greater predictability of the inflation outlook under a targeting regime should contribute to good long-term economic performance everywhere. Moreover, the automatic-stabilizer feature of targets should reassure those who worry that the central bank is overly concerned about inflation to the exclusion of the real economy. Finally, I would argue that transparency and accountability give autonomous central banks legitimacy in a democratic society.
Moreover, a central bank has an incentive to establish rigorous supervision since it would diminish the trade-offs between the need for tightening collateral requirements in downturns to protect its balance sheet and the need for relaxing these collateral requirements to stabilise banks.