From a public-choice perspective, there are two myths on central banking. (Havrilesky 1988) The first myth is that monetary (and fiscal) policy systematically attempt(s) to maximize social welfare. The second myth is that a central bank is an independent, politically neutral institution.
KeywordsMonetary Policy Central Bank Fiscal Policy Money Supply Central Bank Independence
Unable to display preview. Download preview PDF.
- 1.For literature in this social welfare tradition see e.g. Cukierman 1992 43; Dwyer 1985 664.Google Scholar
- 2.For literature that treats the central bank as a bureaucracy see e.g. Toma/Toma 1986.Google Scholar
- 3.For literature in this political approach to central bank behavior see e.g. Cukierman 1992 43; Dwyer 1985 667.Google Scholar
- 4.The chapters are written such that they can easily be read independently of each other.Google Scholar
- 5.It can be argued that an analysis of direct political influence on SNB behavior must include bank-internal decisionmakers such as the Bank Council, the Bank Committee, or even the Board of Directors. (See e.g. Vaubel 1993 for the German Bundesbank.) Political influence from these bank-internal decisionmakers is not investigated here. The theoretical argument is that — since political authorities (the executive) basically controls) who gets appointed to these bodies — only those changes in political preferences can occur that are also preferred by the political authorities. Or as Weingast/Moran (1983 769 Fn. 6) state, „new and different managers are the means but not the cause of agency policy change.“The empirical argument is that in the case of the SNB party composition and interest-group affiliation of these bank-internal authorities does hardly change, violating the comparative statics condition. Alternative measures of political preferences that would eventually allow for a measurement of some variation cannot easily be constructed because of a lack of voting records or popularity measures.Google Scholar