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The Politics of Monetary Policy

In: Handbook of Monetary Economics

  • Alesina, Alberto
  • Stella, Andrea

In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis. We begin with a discussion of rules versus discretion. We then examine the issue of the central bank's independence (CBI) both in normal times and in times of crisis. Then we review the literature of electoral manipulation of policies. Finally we address international institutional issues concerning the feasibility, optimality, and political sustainability of currency unions in which more than one country shares the same currency. A brief review of the Euro experience concludes the paper.

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This chapter was published in:
  • Benjamin M. Friedman & Michael Woodford (ed.), 2010. "Handbook of Monetary Economics," Handbook of Monetary Economics, Elsevier, edition 1, volume 3, number 3.
  • This item is provided by Elsevier in its series Handbook of Monetary Economics with number 3-18.
    Handle: RePEc:eee:monchp:3-18
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

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