Central Bank & Government

           In theory it is of little importance  to  price  stability  whether
      parliament sets rules which central banks are told  to  obey, or
      whether  central  banks  are  made  independent.  In  practice ,
      however, it is extremely hard for governments  to  terminate  the
5    independence of central banks once they have it and it seems
      that central bank  independence  is  more  likely  to  avoid  the
      dangers of inflation
 
           Experience  shows  that  the  freer  a  central  bank  is  from
      government interference,  the lower  is  the  rate  of  inflation. In 
10  a Harvard study, those countries  whose  central  banks  were 
      less  whose  central  banks  were  less  independent   had   an 
      average  inflation  rate  12.5% ,  while  those  countries  whose 
      central banks were  more  independent  had  average  rate  of
      4%. Moreover, countries with freer  central  banks  also  tended 
15  to  have  lower  rates  of  unemployment.  This  fits  the  theory 
      that bank are more successful in economic terms  than  banks
      which are open to government interference.