Politics and Monetary Policy
How and why do politicians’ preferences about monetary policy differ from the interest rates set by independent central banks? Looking at the European Central Bank, the paper shows that politicians, on average, favor significantly lower interest rates. Three factors explain the different preferences. First, politicians put relatively less weight on inflation (and more on output) in their preferred monetary policy reaction function. Second, politicians’ preferences are affected by political economy motives. Third, different preferences are also, and largely, due to different constituencies, as politicians primarily focus on national economic objectives rather than the euro area as a whole.
|Date of creation:||Dec 2010|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Christian Schultz, 2003.
"Information, Polarization and Delegation in Democracy,"
CESifo Working Paper Series
1104, CESifo Group Munich.
- Christian Schultz, 2003. "Information, Polarization and Delegation in Democracy," EPRU Working Paper Series 03-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Maier, Philipp & Bezoen, Saskia, 2004. "Bashing and supporting central banks: the Bundesbank and the European Central Bank," European Journal of Political Economy, Elsevier, vol. 20(4), pages 923-939, November.
- Swank, O H, 1993. "Popularity Functions Based on the Partisan Theory," Public Choice, Springer, vol. 75(4), pages 339-356, April.
- Swank, O.H., 1991. "Popularity Functions Based on the Partisan Theory," Papers 9112-g, Erasmus University of Rotterdam - Institute for Economic Research.
- Maier, Philipp & Sturm, Jan-Egbert & de Haan, Jakob, 2002. "Political pressure on the Bundesbank: an empirical investigation using the Havrilesky approach," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 103-123, March.
- Rebecca Hellerstein, 2007. "Is There a Dead Spot? New Evidence on FOMC Decisions Before Elections," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1411-1427, 09.
- Burton Abrams & Plamen Iossifov, 2006. "Does the Fed Contribute to a Political Business Cycle?," Public Choice, Springer, vol. 129(3), pages 249-262, December.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 1 :comparing information structures," ULB Institutional Repository 2013/9617, ULB -- Universite Libre de Bruxelles.
- Grier, Kevin B., 1991. "Congressional influence on U.S. monetary policy : An empirical test," Journal of Monetary Economics, Elsevier, vol. 28(2), pages 201-220, October.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 199-217.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 2 :application to missions and accountability of government agencies," ULB Institutional Repository 2013/9641, ULB -- Universite Libre de Bruxelles.
- Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-1012, September.
- Adam Geršl, 2006. "Political Pressure on Central Banks: The Case of the Czech National Bank (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(1-2), pages 18-39, January. Full references (including those not matched with items on IDEAS)