IDEAS home Printed from https://ideas.repec.org/a/mes/ijpoec/v47y2018i2p151-177.html
   My bibliography  Save this article

Financial Crisis: The Capture of Central Banks by the Financial Sector?

Author

Listed:
  • Emmanuel Carré
  • Marie-Sophie Gauvin

Abstract

This article analyzes the question of whether central bank capture by the financial sector has increased in the aftermath of the financial crisis beginning in 2007. According to the Public Choice theory, this is inevitable: The financial sector has an increased incentive to capture the central bank for interest rates hikes, inter alia, to prevent inflationary pressures from unconventional monetary policies. On the contrary, for the Post-Keynesian democratic school, this is likely but not inevitable because central bank capture is a complex phenomenon depending on a contest between several actors. The relative ability of the financial sector to affect central bank interest rates, and in which direction it desired to do so, can be time varying. Motivated by profitability, the financial sector can be interested in either interest rate hikes or cuts. This article investigates empirically this theoretical debate for the period from January 1999 to December 2016 for the European Central Bank’s Governing Council, the Federal Reserve’s Board of Governors, and the Monetary Policy Committee of the Bank of England. We participate in this debate first by constructing, as standard in the literature, an F index indicating the ratio of central bankers with financial career background. Secondly, we test empirically the competing hypotheses on the capture of the central bank interest rate by estimating its relationship with our F index. Results are more favorable to the democratic school.

Suggested Citation

  • Emmanuel Carré & Marie-Sophie Gauvin, 2018. "Financial Crisis: The Capture of Central Banks by the Financial Sector?," International Journal of Political Economy, Taylor & Francis Journals, vol. 47(2), pages 151-177, April.
  • Handle: RePEc:mes:ijpoec:v:47:y:2018:i:2:p:151-177
    DOI: 10.1080/08911916.2018.1497576
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/08911916.2018.1497576
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/08911916.2018.1497576?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bergoeing, Raphael & Piguillem, Facundo, 2022. "Cooperatives versus traditional banks: the impact of interbank market exclusion," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Cormier, Benjamin, 2021. "Interests over institutions: political-economic constraints on public debt management in developing countries," LSE Research Online Documents on Economics 112595, London School of Economics and Political Science, LSE Library.
    3. Giuseppe Mastromatteo & Giuseppe Mastromatteo, 2016. "Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework," Economics Working Paper Archive wp_875, Levy Economics Institute.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:ijpoec:v:47:y:2018:i:2:p:151-177. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MIJP20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.