Central bank independence (CBI) is currently a widely debated and topical issue commanding the centre point of many economical and political debates, filling the pages of many scholarly journals. Both central bank independence and accountability are currently regarded as necessary best practices for achieving price stability. The importance of CBI rests on the premise that inflation is primarily a monetary phenomenon, and that the cost of reducing inflation can be lowered by an independent central bank with credibility. Support for CBI also stems from the argument that the power to create money should generally be separated from the power to spend it. This is even more relevant for countries with weak political institutions. However, various studies (cited below) detected lower inflation in those countries where independence of their central banks is the strongest. Countries all over - including some on the African continent - have increased the independence of their central banks accordingly. Copyright (c) 2006 The Author. Journal compilation (c) 2006 Economic Society of South Africa.

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Currency board arrangements (CBAs) are currently widely proposed as a super-fixed exchange rate solution to exchange rate volatility. This paper researches the nature, operation, benefits and disadvantages of CBAs. Benefits comprise improved policy credibility, lower inflation and interest rate levels, increased economic growth, increased foreign capital flows, and sharply reduced currency speculation. These are compared with the shortcomings of CBAs, such as the absence of a lender of last resort, real exchange rate misalignments and their consequences for the economy. The paper identifies the type of country that would be the most likely candidate to benefit from a CBA. Copyright (c) 2007 The Author. Journal compilation (c) 2007 Economic Society of South Africa.