The outcome is higher inflation without lasting improvements in the economy’s level of output and employment. This detracts from monetary policy efficiency and the commitments to price stability cease to be credible. Taking the long view that price stability requires is more difficult for political authorities, which may be naturally inclined to give priority to shorter-term considerations. Moreover, and more generally, changes in government usually entail changes to political goals and, frequently, the replacement of previous commitments with new ones. That is difficult to square with the objective of credibility that private agents demand when they take their 1  A detailed discussion of independent economic agencies in Spain can be found in J. Segura (coord.) (2018), Reguladores y supervisores económicos independientes: el caso español, Fundación Ramón Areces. 2  decisions with medium and long-term results. Also, the eminently technical nature of the functions of central banks likewise warrants this status. All these arguments could be extended to economic regulatory and supervisory agencies other than the monetary authority. Indeed, independence is one of the principles envisaged in “Best Practice Principles on the Governance of Regulators”, a document released by the Organisation for Economic Co-Operation and Development (OECD), to avoid undue influence and maintain confidence.
3  Article 7(4) of the Law of Autonomy of the Banco de España, in keeping with Article 130 of the Treaty on the Functioning of the EU, which states: “When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks." 4  In practice, the personal independence of the institution’s senior officials is sought through the arrangements in respect of appointment, exercise of mandate and stand-down from the post set in place, as a general rule, beforehand.