The paper discusses the changing institutional structure and governance of Central Banks within the political background in which it operates. Four significant trends, viz. movement towards inflation targeting; reorganization of financial supervision and regulation; development of new definitions for the financial stability objective of central banks; and the emergence of public expectations regarding their accountability and transparency have been observed in the recent times in the evolution of Central Banks. The paper argues that Central Banks should not seek responsibilities like financial supervision, which carry reputational risks and require different forms of accountability and political dependence, so that they could maintain monetary policy independence
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