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Public governance of central banks: an approach from new institutional economics

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  • Yoshiharu Oritani
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    Abstract

    The governance of central banks has two dimensions: corporate governance and public governance. Public governance is an institutional framework whereby the general public governs a central bank by and through the legislative and executive bodies in a country. This paper argues that the literature of new institutional economics sheds new light on the public governance of central banks. First, Williamson’s theory of "governance as integrity" (probity) is applied to the internal management of central banks. Moe’s theory of "public bureaucracy" is applied to the concept of central bank independence. Second, we apply agency theory to the issues associated with central bank independence and accountability. Third, public choice theory is applied to central bank independence.

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    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 299.

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    Length: 48 pages
    Date of creation: Mar 2010
    Date of revision:
    Handle: RePEc:bis:biswps:299

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    Related research

    Keywords: central bank; public governance; transaction cost economics; public choice;

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    References

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    1. Kenneth Shepsle & Barry Weingast, 1981. "Structure-induced equilibrium and legislative choice," Public Choice, Springer, vol. 37(3), pages 503-519, January.
    2. Barry Weingast, 1984. "The congressional-bureaucratic system: a principal agent perspective (with applications to the SEC)," Public Choice, Springer, vol. 44(1), pages 147-191, January.
    3. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981.
    4. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
    5. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
    6. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    7. Brousseau, Eric & Glachant, Jean-Michel, 2008. "New institutional economics: a guidebook," Economics Papers from University Paris Dauphine 123456789/12319, Paris Dauphine University.
    8. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
    9. Toma, Mark, 1982. "Inflationary bias of the Federal Reserve System : A bureaucratic perspective," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 163-190.
    10. Weingast, Barry R & Moran, Mark J, 1983. "Bureaucratic Discretion or Congressional Control? Regulatory Policymaking by the Federal Trade Commission," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 765-800, October.
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    Cited by:
    1. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
    2. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum.

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