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Party Affiliation Rather than Former Occupation: The Background of Central Bank Governors and its Effect on Monetary Policy

Author

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  • Matthias Neuenkirch

    (University of Aachen)

  • Florian Neumeier

    (University of Marburg)

Abstract

In this paper, we analyze the relationship between certain characteristics of incumbent central bank governors and their interest-rate-setting behavior. We focus on (i) occupational backgrounds, (ii) party affiliation, and (iii) experience in office and estimate augmented Taylor rules for 20 OECD countries and the period 1974-2008. Our findings are as follows. First, the tenures of central bank governors who are affiliated with a political party are characterized by a relatively dovish monetary policy stance, irrespective of their partisan ideology. Second, party affiliation appears to be more important than occupational background, i.e., all bankers with(out) a party affiliation behave very similarly to each regardless of their specific occupational background. Third, party members react significantly less to inflation and more to output the longer they stay in office.

Suggested Citation

  • Matthias Neuenkirch & Florian Neumeier, 2013. "Party Affiliation Rather than Former Occupation: The Background of Central Bank Governors and its Effect on Monetary Policy," MAGKS Papers on Economics 201336, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201336
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    Cited by:

    1. Donato Masciandaro & Paola Profeta & Davide Romelli, 2023. "Women and Governance: Central Bank Boards and Monetary Policy," Trinity Economics Papers tep1123, Trinity College Dublin, Department of Economics.
    2. de Haan, J. & Eijffinger, Sylvester, 2016. "The Politics of Central Bank Independence," Discussion Paper 2016-047, Tilburg University, Center for Economic Research.
    3. Donato Masciandaro & Paola Profeta & Davide Romelli, 2016. "Gender and Monetary Policymaking: Trends and Drivers," BAFFI CAREFIN Working Papers 1512, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    5. Matthias Neuenkirch & Peter Tillmann, 2016. "Does A Good Central Banker Make A Difference?," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1541-1560, July.
    6. Florian Neumeier, 2018. "Do Businessmen Make Good Governors?," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2116-2136, October.
    7. Emile van Ommeren & Giulia Piccillo, 2021. "The Central Bank Governor and Interest Rate Setting by Committee," CESifo Economic Studies, CESifo Group, vol. 67(2), pages 155-185.
    8. Favaretto, Federico & Masciandaro, Donato, 2016. "Doves, hawks and pigeons: Behavioral monetary policy and interest rate inertia," Journal of Financial Stability, Elsevier, vol. 27(C), pages 50-58.
    9. de Haan Jakob, 2019. "Some Reflections on the Political Economy of Monetary Policy," Review of Economics, De Gruyter, vol. 70(3), pages 213-228, December.
    10. Federico M. Giesenow & Jakob de Haan, 2019. "The influence of government ideology on monetary policy: New cross‐country evidence based on dynamic heterogeneous panels," Economics and Politics, Wiley Blackwell, vol. 31(2), pages 216-239, July.
    11. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    12. Fuchs, Andreas & Richert, Katharina, 2018. "Development Minister Characteristics and Aid Giving," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 53, pages 186-204.
    13. Adam Pilny & Felix Roesel, 2020. "Are Doctors Better Health Ministers?," American Journal of Health Economics, University of Chicago Press, vol. 6(4), pages 498-532.
    14. Fuchs, Andreas & Richert, Katharina, 2015. "Do Development Minister Characteristics Affect Aid Giving?," Working Papers 0604, University of Heidelberg, Department of Economics.
    15. Eichler, Stefan & Lähner, Tom, 2017. "Career experience, political effects, and voting behavior in the Riksbank’s Monetary Policy Committee," Economics Letters, Elsevier, vol. 155(C), pages 55-58.
    16. Farvaque, Etienne & Malan, Franck & Stanek, Piotr, 2020. "Misplaced childhood: When recession children grow up as central bankers," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    17. Neuenkirch, Matthias & Tillmann, Peter, 2014. "Superstar Central Bankers," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100489, Verein für Socialpolitik / German Economic Association.
    18. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    19. Hamza Bennani, 2015. "Dissecting the brains of central bankers: The case of the ECB’s Governing Council members on reforms," International Economics, CEPII research center, issue 141, pages 97-114.
    20. Ghosh, Saibal, 2017. "Does central bank governors term in office matter for macroprudential policies? Evidence from MENA banks," Research in International Business and Finance, Elsevier, vol. 40(C), pages 34-51.
    21. Donato Masciandaro & Paola Profeta & Davide Romelli, 2020. "Do Women Matter in Monetary Policy Boards?," BAFFI CAREFIN Working Papers 20148, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    22. Strong, Christine & Yayi, Constant L., 2023. "The political affiliation of central bankers and government debt: Evidence from Africa," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 603-620.
    23. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    24. Kokoszczyński, Ryszard & Mackiewicz-Łyziak, Joanna, 2024. "Making monetary policy in Poland: Are Polish hawks and doves different?," European Journal of Political Economy, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Central Bank Governors; Monetary Policy; Occupation; Partisanship; Taylor Rules;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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