Goal independence refers to a situation where the central bank itself can choose the policy priorities of stabilising output or prices at any given point of time, thus setting the goal of monetary policy. Instrument independence implies that the central bank is only free to choose the means to achieve the objective set by the Government. In a recent survey (Fry.
M, et al 1999) of central banks, 40 of the total 56 central banks across a broad range of economies defined independence predominantly in terms of instrument independence. Of the remaining 16 responses, many highlighted factors that had implications for the relationship between the Government and the central bank.