Imagine you are advising the leadership of a new, independent country for the design of their central bank. In 1–2 pages, do the following:
Describe one benefit and one drawback for each type of central bank design listed below:
Design 1 – Central bank policy decisions that are irreversible or central bank policy decisions that can be overturned by the democratically elected government.
Design 2 – The central bank has to submit a proposal for funding to the government each year or the central bank finances itself from the earnings on its assets and turns the balance over to the government.
Design 3 – The central bank policymakers are appointed for periods of four years to coincide with the electoral cycle for the government or the central bank policymakers are appointed for 14-year terms.
In 1–2 paragraphs, identify the design you would recommend for this country and why.
