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Political Pressure on Central Banks

Carola Binder

Journal of Money, Credit and Banking, 2021, vol. 53, issue 4, 715-744

Abstract: I construct a quarterly data set on political pressure faced by 118 central banks from 2010 to 2018 using country‐level reports. I code whether each central bank is reportedly succumbing to pressure or resisting pressure. About 10% of central banks reportedly face political pressure in an average year. Even central banks with high legal independence frequently face pressure—nearly always for looser monetary policy. Pressure on the central bank is associated with higher inflation and inflation persistence. Pressure is more likely to come from governments with left‐wing or nationalist executives, few checks and balances, or weak electoral competition.

Date: 2021
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Handle: RePEc:wly:jmoncb:v:53:y:2021:i:4:p:715-744