Does politics drive conflict in central banks’ committees? Lifting the veil on the European Central Bank consensus
| Author | Manuela Moschella,Nicola M Diodati |
| Published date | 01 June 2020 |
| Date | 01 June 2020 |
| DOI | http://doi.org/10.1177/1465116519890412 |
| Subject Matter | Articles |
Article
Does politics drive
conflict in central banks’
committees? Lifting the
veil on the European
Central Bank consensus
Manuela Moschella
Faculty of Political and Social Sciences, Scuola Normale
Superiore, Florence, Italy
Nicola M Diodati
Faculty of Political and Social Sciences, Scuola Normale
Superiore, Florence, Italy
Abstract
This study investigates whether and to what extent political factors drive disagreement
withinthe allegedly consensual monetary committeeof the EuropeanCentral Bank. Absent
voting data, the article assessesdisagreement based on the semantic distance between the
policypositions publicly articulated by the EuropeanCentral Bank President and the central
banks of Eurozone member states. The empirical analysis shows that the disagreement
articulated by national central bankers is affected by the ideological inclinations of the
governments of the countries they represent. Our findings thus suggest that central
bankers’ position-taking is shaped not only by economic conditions but also by domestic
political considerations. This result challenges the European Central Bank’s projected
image of itself as an institution whose members are impermeable to domestic political
pressures as a way to defend the independence of the institution to which they belong.
Keywords
Central banking, committee decision-making, conflict, European Central Bank, text
analysis
Corresponding author:
Manuela Moschella, Faculty of Political and Social Sciences, Scuola Normale Superiore, Palazzo Strozzi,
Florence 50123, Italy.
Email: manuela.moschella@sns.it
European Union Politics
2020, Vol. 21(2) 183–203
!The Author(s) 2019
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DOI: 10.1177/1465116519890412
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Introduction
The delegation of monetary policy responsibilities to independent central banks
has been a defining feature of the organization of several domestic political
systems over the past three decades. A parallel development has been the wide-
spread adoption of committee decision-making systems to make monetary policy
decisions. According to the International Monetary Fund (IMF) for instance,
more than 75% of the central banks in 126 countries currently make monetary
policy decisions in a committee (IMF, 2016). As in any other political institution,
members of monetary committees often disagree in their deliberations. This dis-
agreement reflects the different knowledge bases, different heuristics for interpret-
ing the world and different modalities for processing information that individual
members possess (Blinder, 2007). However, a significant outstanding question in
the literature is whether and to what extent political factors drive disagreement.
Although a number of studies have shown that government appointments
(Chappell et al., 2008; Hix et al., 2006) and interest group pressures (Jacobs and
King, 2016) contribute to shaping central bankers’ heterogeneous preferences, the
empirical literature on the role of domestic politics in shaping dimensionality
within central banks is sparse. Instead, studies have focused on other drivers,
such as the importance of regional or national economic conditions for monetary
decisions (Chappel et al., 2008; Hayo and Meon, 2013; Heinemann and Huefner,
2004; Meade and Sheets, 2005), the institutional rules governing deliberations
(Schonhardt-Bailey, 2013), bureaucratic incentives (Moschella and Pinto, 2019)
and socialization (Ban and Patenaude, 2019; Johnson, 2016; McNamara, 1998),
with the view to map central bankers’ preferences generally on a hawk-dove scale
(Baerg and Lowe, 2020).
The contribution of this study is a systematic analysis of whether political
factors structure conflict among central bankers in the European Union (EU).
The European Central Bank (ECB) is indeed a particularly interesting institution
to study conflict and ascertain its political origins because its members are required
to make decisions that are extremely consequential for the economic prospects of
19 different countries; these decisions are supposed to be based only on a Eurozone
economic perspective and made independently of political pressures. However, we
argue that governments’ ideological positioning, public opinion and national
economic interests might well shape the disagreement among ECB members.
We test these propositions on an original dataset comprising the policy
positions articulated in public speeches by European monetary authorities between
2001 and 2017.
Based on the analysis of the semantic distance between the policy positions
articulated by the ECB president and the governors of the 19 national central
banks (NCBs) whose currency is the euro, we find that the disagreement articu-
lated by national central bankers is affected by the ideological inclinations of the
governments of the countries they represent. In particular, disagreement between a
184 European Union Politics 21(2)
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