The impact of the global financial crisis on central banks independence and mandate : cases of the US Fed, the ECB and the BoE

The recent global financial crisis has shaken the celebrated paradigm of an independent central bank with monetary policy mandate focused on the paramount objective of price stability. During the crisis, central banks, particularly the Fed, the ECB and the BoE; in order to restore financial stability adopted many “non-standard measures” which successfully prevented greater financial turmoil. By providing emergency funding to unstable financial sectors, central banks’ balance sheets have expanded considerably which may pose certain risks to central banks’ independence in the conduct of its traditional monetary policy objectives. Furthermore, seeing the successes of central banks in fighting the crisis, the US, the British and the EU lawmakers decided to enhance their financial stability mandate, which in turn raised many questions as to its “clear and limited” scope and its compatibility with democratic principles. This thesis will explore the post-crisis challenges for central banks, raised by expansion of their balance sheets and broadened scope of their policy objectives, with regard to their independence and mandate.