Goal-independent central banks
Subtitle: why politicians decide to delegate
By: prepared by Christopher Crowe.
Contributors: International Monetary Fund. Research Dept.
Series: IMF working paper -- WP/06/256
Publisher: International Monetary Fund, Research Dept.
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 41
Subjects: Banks and banking, Central -- Political aspects -- Econometric models.; Monetary policy -- Political aspects -- Econometric models.; Economic policy -- Political aspects -- Econometric models.; Inflation (Finance) -- Political aspects -- Econometric models.
Description: A motivation for central bank independence (CBI) is that policy delegation helps politicians manage diverse coalitions. This paper develops a model of coalition formation that predicts when delegation will occur. An analysis of policy preferences survey data and CBI indicators supports the predictions. Case studies, drawn from several countries' recent past and the nineteenth-century United States, provide further support. Finally, the model explains why the expected negative relationship between CBI and inflation is not empirically robust: endogenous selection biases the estimated effect towards zero. The data confirm this.
Notes: Caption title.

"November 2006."

Includes bibliographical references (p. 37-41).

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