Median Voter Preferences, Central Bank Independence and Conservatism
AbstractThis paper studies how the independence and conservatism of a central bank relate to the structure and stability of the median voter preferences. This is done by means of a model of endogenous delegation in which an opportunistic policy-maker chooses the monetary regime (independence and conservatism) to maximise the welfare of the median voter. The results show that a high degree of inflation aversion of monetary policy is not necessarily associated with a high degree of central bank independence. A high degree of inflation aversion of society (i.e. of the median voter) may lead to establish a central bank which is highly inflation averse, without necessarily making it independent. This suggests that the negative correlation between inflation and central bank independence indices detected by several empirical studies may reflect a link between inflation and some deep features of social preferences.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 351.
Date of creation: Apr 1999
Date of revision:
central banks; elections; median voter;
Other versions of this item:
- Lippi, Francesco, 2000. " Median Voter Preferences, Central Bank Independence and Conservatism," Public Choice, Springer, vol. 105(3-4), pages 323-38, December.
- Lippi, F., 1999. "Median Voter Preferences, Central Bank Independence and Conservatis," Papers 351, Banca Italia - Servizio di Studi.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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