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Median Voter Preferences, Central Bank Independence and Conservatism

Francesco Lippi

No 351, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper studies how the independence and conservatism of a central bank relate to the structure and stability of the median voter preferences. This is done by means of a model of endogenous delegation in which an opportunistic policy-maker chooses the monetary regime (independence and conservatism) to maximise the welfare of the median voter. The results show that a high degree of inflation aversion of monetary policy is not necessarily associated with a high degree of central bank independence. A high degree of inflation aversion of society (i.e. of the median voter) may lead to establish a central bank which is highly inflation averse, without necessarily making it independent. This suggests that the negative correlation between inflation and central bank independence indices detected by several empirical studies may reflect a link between inflation and some deep features of social preferences.

Keywords: central banks; elections; median voter (search for similar items in EconPapers)
JEL-codes: D72 D73 E58 (search for similar items in EconPapers)
Date: 1999-04
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Journal Article: Median Voter Preferences, Central Bank Independence and Conservatism (2000) Downloads
Working Paper: Median Voter Preferences, Central Bank Independence and Conservatis (1999)
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