The Politics of Central Bank Appointments

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Authors Caitlin Ainsley
Journal/Conference Name THE JOURNAL OF POLITICS
Paper Category
Paper Abstract Monetary delegation to independent central banks is the institutional standard for responsible monetary policy making. Governments overcome their own high inflation biases by delegating policy-making discretion to conservative central bankers with political independence and long terms of appointment. With a formal model of central bank appointments and monetary policy making, I provide results suggesting this canonical result hinges on widespread, empirically false assumptions about the nature of central bank preferences and the economic environment in which monetary policy making occurs. During periods of heightened monetary uncertainty, delegation to an independent central bank is a less effective institutional solution to achieving inflation goals than extant theory suggests. Under realistic economic conditions, monetary delegation can result in economic outcomes even worse than those we would expect if the government had maintained discretion. I test several predictions from the model drawing appointm...
Date of publication 2017
Code Programming Language R
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