Goal independent central banks: Why politicians decide to delegate

Christopher Crowe ()

European Journal of Political Economy, 2008, vol. 24, issue 4, 748-762

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. The model also 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: C31; C72; D72; E31; E58; Central; bank; independence; Inflation; Coalition; formation; Treatment; effects (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:24:y:2008:i:4:p:748-762

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