The Wealth of Institutions: Central Bank Independence, Credibility, and the Road Ahead

When Adam Smith wrote The Wealth of Nations 250 years ago, he posed a foundational question: what institutions drive prosperity? One of the most durable answers has been an independent central bank. What happens when that independence comes under pressure?

As debates over the Federal Reserve’s independence have intensified, financial markets have shown a remarkably measured response. Why? In this conversation, economist and former Fed Governor Randall Kroszner will examine what central bank independence really means, and whether it is an end in itself or simply a means to the deeper goal of credibility.

Drawing on recent market data, Kroszner will explore how inflation expectations, interest rates, and the value of the dollar have responded to political pressure on the Fed, and what that reaction tells us about the nature of institutional trust in the United States. He will also discuss how central banks can respond to the rising threat of stagflation as a consequence of the hostilities in the Middle East.

Professor Kroszner will be joined in conversation by moderator Tess Vigeland.

Refreshments will be provided.

Please contact bfi-events@uchicago.edu if you have any questions.