Central Banks: Independent Central Bank For Investors in emerging markets:  Banks that are independent (good, safe for the foreign investor):

 

Central Banks:

 

• Bank of Canada (http://www.bankofcanada.ca/)
• Bank of Japan (http://www.boj.or.jp/en/)
• European Central Bank (http://www.ecb.int)
• Federal Reserve System (http://www.federalreserve.gov)
• Swiss National Bank (http://www.snb.ch/)

 

Independent Central Bank

 

Why is it important that a country has an independent central bank?

 

Because it allow them to do whats best to "target inflation"  with monetary policy, rather than doing whats best to help the politicians.   The troubles happen when politicians have their fingers in the central bank and can influence monetary policy.  No country will ever want slow growth and high unemployment (especially a democracy near election time!).  But, if inflation gets high, the best long term policy of the central bank is to raise interest rates to combat inflation.   The trouble is...that raising interest rates has the negative consequence of slowing down economic growth, and of raising unemployment (two things that politicians are lothe to do).  For this reason, it is essential that a country have independence of its central bank from the influence of meddling politicians!  Or else, as we have seen in country after country...inflation will get out of control, and there will be a crisis. 

 

 

For Investors in emerging markets: 

 

Look for countries with independent central banks, especially if you are going to operate in the country (see our discussion of FDI).   For example,  in Peru, the central bank is independent and is active in "inflation targeting"  (which is not popular, but is good for fighting inflation).  So, in Peru, its unlikely that inflation will come back under 2^nd Garcia’s presidency.

 

 

Banks that are independent (good, safe for the foreign investor):

 

Most richer countries today have an "independent" central bank--- that is, one which operates under rules designed to prevent political interference.

• European Central Bank,
• and the U.S. Federal Reserve.
• the Banco Central de Chile,
• the Reserve Bank of Australia,
• the Reserve Bank of India,
• the Bank of England,
• the Bank of Canada,
• the Banco de la República de Colombia,
• Norges Bank,
• State Bank of Pakistan,
• National Bank of Azerbaijan
• the Nederlandsche Bank,

 

not independent includes:  (need list)

 

 

Kookyplan Links:

 

• list of international banks
• international development
• inflation targeting
• economic populism

 

 

External Links:

 

• http://en.wikipedia.org/wiki/Central_bank

 

 

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