In Europe, primary law assigns a strong role to central bank independence, central bank governors have terms of office which are decoupled from the regular electoral cycles, and central banks enjoy a high degree of operational independence. In addition, complementary institutional frameworks and clear rules are needed that delineate the role of monetary, fiscal, and macroprudential policies.
Absent such frameworks, monetary policy can come under fiscal or financial dominance. 5. Transparency, accountability, and communication are equally important to sustain public support of independence. This can be a balancing act: On the one hand, transparency requires a structured policy cycle. Evaluation frameworks are needed to link policy objectives to policy instruments and to analyse the intended and unintended consequences of policy choices.