Why might central bank sometimes want to say yes to actions

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Reference no: EM131303150

Adam Posen, a member of the Bank of England's Monetary Policy Committee was quoted as arguing in a speech that: Central banks' purchases of government debt . . . far from undermining their independence . . . should enhance their credibility. . . . Mr. Posen said, . . .

"What matters for our independence is our ability to say no and to mean it, and to be responsible about when we choose to say yes."

a. Why might purchasing government debt be seen as undermining a central bank's independence?

b. What actions does a central bank need to have the independence to say "no" to? Why might a central bank sometimes want to say "yes" to these actions?

Reference no: EM131303150

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