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Central Bank Independence: The Case Of Croatia

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Executive Summary

A trend of increasing role of central bank's independence took place in the most of modern economies. The Central Bank Independence (CBI) is seen as a way of bringing economy to a higher level. It is argued that an independent Central Bank is more credible and moreover, that the higher degree of central bank independence facilitates central bank to identify signals of financial problems and alert financial markets. Furthermore, an independent central bank is less likely to be exposed to the inflationary bias, inherent in monetary policy, and is more aware of the inflation costs of expansionary monetary policy.

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