Goal-Independent Central Banks: Why Politicians Decide to Delegate

Christopher Crowe

No 2006/256, IMF Working Papers from International Monetary Fund

Abstract: A motivation for central bank independence (CBI) is that policy delegation helps politicians manage diverse coalitions. This paper develops a model of coalition formation that predicts when delegation will occur. An analysis of policy preferences survey data and CBI indicators supports the predictions. Case studies, drawn from several countries' recent past and the nineteenth-century United States, provide further support. Finally, the model explains why the expected negative relationship between CBI and inflation is not empirically robust: endogenous selection biases the estimated effect towards zero. The data confirm this.

Keywords: WP; mover accent; monetary policy; Central bank independence; inflation; coalition formation; treatment effects; coalition-formation game; rising prices; coalition structure; policy platform; Central bank autonomy; Personal income; Africa (search for similar items in EconPapers)
Pages: 41
Date: 2006-11-01
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Citations: View citations in EconPapers (4)

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