Central bank independence and democracy: does central bank independence hinder democratic development of the country?

Abstract

The aim of this research is to study the condition of independence of the central bank, to what outcomes it brings, what conflicts can arise, and does the independence condition violates democratic governance principles. After general introduction literature, findings and analyses follows. They represent the analyses of the research questions and hypothesis separately. At first, the term central bank independence is described for precisely understanding the topic. What stages of development the modern central banks have passed and where they have occurred nowadays. The research is accompanied with the examples on Armenian and American central banks. The paper aims to find out whether the independence of the central bank is a necessary condition for the states to adopt, is it necessary for achieving best possible outcomes, what potential conflicts can arise between politics and economics and how that conflicts can be solve in favour of the state. The paper discusses how the condition of independence can violate the democratic governance, in what circumstance and is it possible to avoid the violation of democratic principles or not. Finally the paper comes up with conclusions and some recommendations, the fulfillment of which will contribute to the elimination of current drawbacks and will promote further development of the system.