On empowering the central bank with goals to stimulate economic growth

Abstract

The specifics of the inflation targeting policy pursued by the Bank of Russia lead to the emergence of proposals to empower it with aims, goals or targets to promote economic growth. In the study, the feasibility of such proposals is considered from the point of view of targeting policy properties, arguments in favor of using growth indicators, the possibility of planning with multiple goal-setting conditions, and the impact on expectations. It has been established that the direct empowerment of growth targeting will only lead to the Bank’s claim that there is no opportunity to increase the growth rate. The imposition of the target value can be seen as the erosion of the independence of the Bank. The failure to coordinate goals (if they are set autonomously by the fiscal and monetary policy authorities) will lead to inefficiency. Planning in the context of multiple goals will return the Bank to a situation of dynamic inefficiency, evaporating the low inflationary expectations. The position of the Bank of Russia regarding assessments of potential economic growth and the ability to influence it needs much more detailed presentation than is currently declared in official documents.