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Goal-Independent Central Banks: Why Politicians Decide to Delegate

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  • Mr. Christopher W. Crowe

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.

Suggested Citation

  • Mr. Christopher W. Crowe, 2006. "Goal-Independent Central Banks: Why Politicians Decide to Delegate," IMF Working Papers 2006/256, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/256
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    References listed on IDEAS

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    Cited by:

    1. Crowe, Christopher & Meade, Ellen E., 2008. "Central bank independence and transparency: Evolution and effectiveness," European Journal of Political Economy, Elsevier, vol. 24(4), pages 763-777, December.
    2. Marc Quintyn, 2009. "Independent agencies: more than a cheap copy of independent central banks?," Constitutional Political Economy, Springer, vol. 20(3), pages 267-295, September.
    3. Crowe, Christopher, 2008. "Goal independent central banks: Why politicians decide to delegate," European Journal of Political Economy, Elsevier, vol. 24(4), pages 748-762, December.

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