Monetary and Fiscal Policy Controversies: A Polish Perspective
DOI:
https://doi.org/10.15678/AOC.2024.2602Keywords:
monetary policy, fiscal policy, central bank, inflation, budget deficit, public debtAbstract
Objective: The objective of the article is to determine whether the policy of the National Bank of Poland (NBP) as conducted in recent years may be the basis for bringing the president of the NBP before the State Tribunal for violating the Constitution of the Republic of Poland.
Research Design & Methods: The independence of the central bank is of undoubted value in terms of controlling the price level (inflation), but the ban on supporting the government during periods of financial crisis, for example the COVID-19 pandemic crisis, cannot be inviolable. In the detailed analysis of the subject literature, the significance of the activities of other central banks, primarily the European Central Bank, in 2007, is included. An analysis of the NBP’s activities during the COVID-19 pandemic was carried out, with particular emphasis on inflation, independence from the government, communication with the public, and financing the government’s borrowing needs.
Findings: Analysis of allegations regarding the NBP policy, including the validity of criticism (inflation). However, there are a number of counter-arguments against taking such drastic steps against the president of the National Bank of Poland, whose actions resulted in government support (redemption launched on the secondary market) during the COVID-19 pandemic period, for violating the Constitution.
Implications/Recommendations: It is necessary to introduce a provision into the Constitution allowing the NBP to purchase treasury bonds on the secondary market during periods of extraordinary difficulties on financial markets. Consideration should be given to changing the method of appointing members of the Monetary Policy Council (MPC) in order to prevent a single political grouping exercising political power for more than one term.
Contribution: The policies of many central banks in the world, including the ECB, the Fed, the Bank of England, and others, confirm the hypothesis that central banks cannot be (and are not) inactive during periods of crisis, in which the fiscal policy resources available to the government are insufficient. The paper draws particular attention to the need for a pragmatic approach in Poland in extreme/crisis conditions. It also points out the need for institutional coordination of fiscal and monetary policy at the Financial Stability Committee.
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