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Governing the Governors: A Clinical Study of Central Banks

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Author Info
Frisell, Lars
Roszbach, Kasper F.
Spagnolo, Giancarlo

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Abstract

Recent research on central bank governance has focused mainly on their monetary policy task. As the sub-prime loan market turmoil reminded us - central banks play a crucial role in financial markets not only in setting monetary policy, but also in ensuring their soundness and stability. In this paper we study the specific corporate governance structures of a number of central banks in light of their complex role of inflation guardians, bankers’ banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review their current institutional arrangements, e.g. formal objectives, ownership, board and governor appointment rules, term limits and compensation, using both existing surveys and newly collected information; and we contrast them with the structures suggested in the corporate and public governance literatures, where present. Our analysis highlights a striking variety in central bank governance structures and a number of specific issues that appear unsatisfactorily addressed by existing research, including the incentive structure for governor and board members, the balance between central banks’ multiple objectives, and the need for term limits or post-employment restrictions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6888.

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Date of creation: Jun 2008
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Handle: RePEc:cpr:ceprdp:6888

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Related research
Keywords: accountability; bank regulation; board structure; central bank independence; central banks; cooling-off periods; governance; governor remuneration; regulatory capture; term limits;

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Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de España Working Papers 0725, Banco de España. [Downloadable!]
  2. Marie-Thérèse Camilleri Gilson & Tonny Lybek & Kenneth Sullivan, 2007. "Audit Committees in Central Banks," IMF Working Papers 07/73, International Monetary Fund. [Downloadable!]
  3. Hasan , Iftekhar & Mester, Loretta, 2008. "Central bank institutional structure and effective central banking: cross-country empirical evidence," Research Discussion Papers 29/2008, Bank of Finland. [Downloadable!]
    Other versions:
  4. Clare Leaver, 2007. "Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies," Economics Series Working Papers 344, University of Oxford, Department of Economics. [Downloadable!]
  5. Ulrich H. Klueh & Peter Stella, 2008. "Central Bank Financial Strength and Policy Performance: An Econometric Evaluation," IMF Working Papers 08/176, International Monetary Fund. [Downloadable!]
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