Effectiveness, independence and credibility of Central Bank in monetary polcy: Turkey example

The idea that central banks should be independent institutions is as old as the history of those. The examination of this idea as an economic research subject began when the problem of inflation and unemployment reached significant levels at the end of 1970s. At this period, it is observed that some countries obtain more independence to their central banks. Many studies on this subject showed when independence increases, the inflation level decreases. But these studies were about the some developed countries. The studies like Cukierman, Webb and Neyaptı?s which included less developed and developing countries couldn?t prove any relationship between independence and inflation level for these countries. Moreover, no direct relationship could be found between central bank independence and the other macro economic targets. However, central bank independence should not be excluded. Success of central banks depends on their credibility on the eye of economic agents. One of the conditions to obtain credibility is the central bank independence. A credible central bank becomes an actor who is taken account and dictates the economy. This means an effective central bank. In conclusion, independence provides credibility and credibility provides effectiveness and an effective central bank can reach its targets with correct policies.