When citizens are more aware of the costs of inflation, and when governments are less able to reap benefits from high inflation and thus have less incentive to use the central bank as a piggy bank, institutional reforms that make central banks more credible and independent are more likely to be adopted and sustained.
13 The fundamental forces I have described today - globalization, deregulation, financial innovation, and public understanding about the costs of inflation - provided the impetus for fighting inflation and opened the political path to institutional reforms, such as central bank independence, that enhance central bank credibility. Once in place, these reforms made further progress against inflation easier and raised the costs of backsliding.