THE POLITICS OF INDEPENDENT CENTRAL BANKS
| Published date | 01 March 2017 |
| Author | CHASE M. FOSTER |
| Date | 01 March 2017 |
| DOI | http://doi.org/10.1111/padm.12292 |
doi: 10.1111/padm.12292
BOOK REVIEW ESSAY
THE POLITICS OF INDEPENDENT CENTRAL BANKS
CHASE M. FOSTER
Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality
Christopher Adolph
Cambridge University Press, 2016, 390 pp., £19.99 (pb), ISBN: 978–1107567092
The Power and Independence of the Federal Reserve
Peter Conti-Brown
Princeton University Press, 2016, 368 pp., £19.96 (hb), ISBN: 978–0691164007
Economy of Words: Communicative Imperatives in Central Banks
Douglas R. Holmes
University of Chicago Press, 2013, 278 pp., £19.50 (pb), ISBN: 978–0226087627
Central banks have long played a far larger role in policy-making than their legal mandates
might imply. In recent years their power and inuence have become even greater. Since
the nancial crisis, public banks around the world have taken on more direct responsibil-
ities for nancial supervision and regulation, and pushed monetary policy to new limits
in order to stimulate the global economy. In the United States and Eurozone, in particular,
political barriers have limited legislative responses to the crisis, forcing regulatory institu-
tions to pick up the slack. As a result, central banking institutions today possess broader
policy-making authority and discretion than they possessed a decade ago.
With greater power comes greater responsibility and, in the world of academia, greater
scrutiny. In recent years, a number of books have challenged some of the idées reçues on
central banks. Chief among the critical targets has been a set of theories, inuential in
policy-making circles since the ination-ridden economic crises of the 1970s, extolling for-
mally independent central banks as the best (if not only) way for governments to maintain
price stability. Such theories argued that, since elected ofcials would always be incen-
tivized to use monetary policy powers to gin up the economy preceding an election, leav-
ing monetary policy to the discretion of elected ofcials would produce an inationary
bias. Only formally independent institutions, freed from the inuence of the short-term
election cycle, could make the ‘credible commitments’ necessary to maintain price stabil-
ity. In the 1980s and 1990s, a number of studies found correlations between low ination
and independent central banks (e.g. Alesina and Summers 1993). In the same period,
many states established formally independent banks, particularly in Europe. The EU even
enshrined the principles of Central Bank Independence (CBI) and a commitment to low
ination in the 1992 Maastricht Treaty.
Chase M. Foster is at the Department of Government, Harvard University,USA
Public Administration Vol.95, No. 1, 2017 (289–293)
© 2016 John Wiley & Sons Ltd.
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