Central Banking as a Political Principal-Agent Problem

Michele Fratianni, Juergen von Hagen and Christopher Waller

Economic Inquiry, 1997, vol. 35, issue 2, 378-93

Abstract: Due to their ties with elected leaders, central bankers may pursue policies that are not in society's best interests. Consequently, the relationship between the public and the central bank can be characterized as a principal-agent problem. An inflation and stabilization bias arise as a result of this agency problem and the magnitudes of these biases depend on the political environment. Various institutional proposals for eliminating these biases are examined and the authors find that central bank independence and performance contracts work best. However, they argue that central bank independence is preferable for resolving the agency problem. Copyright 1997 by Oxford University Press.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (42)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Central Banking as a Political Principal-Agent Problem (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:ecinqu:v:35:y:1997:i:2:p:378-93

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().