4 See Acharya (2015) for discussion on the resulting need to ensure that the central bank has regulatory scope over parts of “shadow banking” that are likely to be systemically important. 5  If such efforts are successful, they induce policy myopia in the economy that substitutes macroeconomic stability with punctuated arrival of financial crises.
Therefore, there are several reasons why enshrining and maintaining central bank independence ends up being an inclusive reform for the economy; and conversely, undermining such independence a regressive, extractive one: (i)  When the government is seen often making efforts to dilute the central bank’s policies and effectively coercing the central bank into such dilutions, banks and private sector spend more time lobbying for policies that suit them individually, at the cost of collective good, rather than investing in value creation and growth.