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

  • Yoshiharu Oritani
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    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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    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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    1. 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.
    2. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
    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, June.
    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. Toma, Mark, 1982. "Inflationary bias of the Federal Reserve System : A bureaucratic perspective," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 163-190.
    8. 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.
    9. Brousseau, Eric & Glachant, Jean-Michel, 2008. "New institutional economics: a guidebook," Economics Papers from University Paris Dauphine 123456789/12319, Paris Dauphine University.
    10. Kenneth Shepsle & Barry Weingast, 1981. "Structure-induced equilibrium and legislative choice," Public Choice, Springer, vol. 37(3), pages 503-519, January.
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