zdenek tuma : europe's club of nations needs a rule change comment by mr zdenek tuma, governor of the czech national bank, in the published financial times ( london, england ), 4 january 2007. * * * the european union is a pretty big club and it will only get bigger. the rules and institutional framework used by the 27 members to make decisions are, however, much the same as they were when there were six or 15 members. the process of enlargement poses a dilemma : with the number of members growing we need rules respected by everyone more than ever before, but at the same time such rules can be a straitjacket, especially given that the present rules were designed for a very different club. one example is monetary policy and the process of adopting the euro. policymakers designed a set of rules 15 years ago that are applied any time a country wants to join the single currency. the country is required to comply with the maastricht criteria and also to stay for at least two years within the exchange rate mechanism - 2 framework. back then, these rules might have been perfectly legitimate, but today they are outdated and - counter - productive. the erm - 2 might have made sense in a situation where monetary policies around western europe were based primarily on fixed exchange rates explicitly or implicitly pegged to the d - mark. then, the erm - 2 framework worked as a platform for co - operation among countries with interlocked currencies. today, such a system does not generate any benefits for most eu members. there now exists a wide range of monetary policy frameworks, running from currency boards and hard pegs ( used by denmark and the baltic states ) to inflation - targeting economies with floating exchange rates ( the uk, sweden, the czech republic, poland ), with other countries lying somewhere in between. countries with currency boards have been allowed to pursue their original policy within the erm - 2, meaning that fulfilling the condition of staying inside this system is a formality. but what is the sense in asking countries that already use inflation targets and floating rates to enter the erm - 2? the step is simply counter - productive. it implies switching from a regime that is perfectly compatible with the european central bank framework to a semi - fixed exchange rate, which is incompatible. we certainly do not need any exchange rate band to assess whether a currency is stable as determined by the market - we can just take a look

mojmir hampl : central bank independence in practice - the case of the czech republic speaking points by mr mojmir hampl, vice governor of the czech national bank, at the annual research conference of the central bank of ukraine, kiev, 1 june 2018. * * * ladies and gentlemen, before i begin my talk in earnest, i would like to thank the organizers for inviting me to this inspiring event. it is an honor to participate in such a distinguished panel. and it is a particular pleasure for me to visit kiev, one of the great historical pivots of europe and also a city with immense economic potential. the latter, i believe, can be said about ukraine in general. the topic of this panel and the entire conference is monetary - fiscal interactions. this is an important issue, and i am convinced that a good working relationship between the central bank and the government is imperative for the proper counter - cyclicality of economic policy. my intention today, however, is to offer a related but cautionary tale. i will talk about central bank independence, with an emphasis on the experience of my own country. few economists nowadays doubt the importance of central bank independence for achieving price stability. for example, the latest meta - analysis of this research question summarizes 300 empirical estimates from dozens of studies and finds strong evidence that independence is crucial for delivering low inflation ( iwasaki and uegaki, 2017 ). this finding holds for both developed and emerging economies, as the authors clearly show. but many economists in this stream of literature, most prominently alex cukierman, stress that it is not enough to have independence enshrined in the central bank ’ s charter. legal independence is a necessary condition for actual independence, but not a sufficient one. i would say that actual independence is a state of mind of central bankers. this state of mind, then, determines the outcome of monetary policy and is imperative for providing price stability. so how can actual independence differ from legal independence? the key condition for actual independence is the de facto impossibility to dismiss central bank board members. in fact, the charters of almost all central banks around the world ( including the national bank of ukraine and the czech national bank ) allow for board members to be dismissed under some very specific conditions. but the applicability of these conditions varies widely, depending on custom and – crucially, i believe – the central bank ’ s standing in society. this observation brings me to an important point