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Who Wants an Independent Central Bank? Monetary Policy-Making and Politics

  • Ozkan, F Gulcin

The costs and benefits of cooperative monetary and fiscal policy are analysed in the framework of a partisan business-cycles model. It is shown that political parties with different ideologies prefer to choose different arrangements for macroeconomic policy-making. More specifically, right-wing parties favour independent central banks more than left-wing parties. An independent central bank is also the generally preferred option from a social welfare point of view. In addition, the form of policy-making arrangements between the fiscal and monetary authorities is shown to influence the extent of partisan cycles. Copyright 2000 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 102 (2000)
Issue (Month): 4 (December)
Pages: 621-43

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Handle: RePEc:bla:scandj:v:102:y:2000:i:4:p:621-43
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  1. repec:ner:tilbur:urn:nbn:nl:ui:12-74443 is not listed on IDEAS
  2. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
  3. Ozkan, F Gulcin, 1998. "Partisan Business and Budget Cycles with Separate Fiscal and Monetary Authorities," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 178-95, March.
  4. Sachs, Jeffrey & Alesina, Alberto, 1988. "Political Parties and the Business Cycle in the United States, 1948-1984," Scholarly Articles 4553026, Harvard University Department of Economics.
  5. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  6. Douglas A. Hibbs, 1994. "The Partisan Model Of Macroeconomic Cycles: More Theory And Evidence For The United States," Economics and Politics, Wiley Blackwell, vol. 6(1), pages 1-23, 03.
  7. Bovenberg, A.L. & Beetsma, R.M.W.J., 1997. "Central Bank independence and public debt policy," Other publications TiSEM d1fc1375-507c-445b-9b38-d, Tilburg University, School of Economics and Management.
  8. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  9. Ohlsson, Henry & Vredin, Anders, 1996. " Political Cycles and Cyclical Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 203-18, June.
  10. Beetsma, Roel M. W. J. & Bovenberg, A. Lans, 1997. "Central bank independence and public debt policy," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 873-894, May.
  11. Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
  12. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
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