02024cas a2200253 a 4500 AALejournalIMF011822 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475502916 1018-5941 BD-DhAAL BD-DhAAL Valencia, Fabian. Central Bank Independence and Macro-Prudential Regulation / Fabian Valencia, Kenichi Ueda. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the socially optimal level of inflation. Ex-post, however, the central bank chooses inflation above the social optimum to reduce the real value of private debt. This inefficient outcome arises when macro-prudential policies cannot be adjusted as frequently as monetary. Importantly, this result arises even when the central bank is politically independent. We then consider the role of political pressures in the spirit of Barro and Gordon (1983). We show that if either the macro-prudential regulator or the central bank (or both) are not politically independent, separation of price and financial stability objectives does not deliver the social optimum. Mode of access: Internet Ueda, Kenichi. IMF Working Papers; Working Paper ; No. 2012/101 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/101/001.2012.issue-101-en.xml IMF e-Library