scholarly journals Some Reflections on the Political Economy of Monetary Policy

2020 ◽  
Vol 70 (3) ◽  
pp. 213-228
Author(s):  
Jakob de Haan
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Political Ideology ◽  
Wealth Inequality ◽  
Theoretical Work ◽  
Central Bank Independence ◽  
The Political ◽  
The Government ◽  
Redistributive Effects ◽  
The Impact

AbstractDuring the past decades, central bank independence has been increased in a large number of countries. However, even an independent central bank does not operate in a political vacuum. For instance, governments generally appoint political allies, presuming that consequently the central bank will follow policies that are in line with the governments’ preferences. The first part of this paper reviews recent research on whether the political ideology of the government has any impact on monetary policies pursued. It is argued that if forward-looking data are used to estimate Taylor-rule models for a panel of OECD countries that take country heterogeneity into account, there is no strong evidence for partisan effects on monetary policy. One of the reasons that central bank independence is no longer taken for granted is the acclaimed redistributive effects of monetary policy. The second part of the paper reviews recent research on the impact of conventional and unconventional monetary policy on income and wealth inequality. It is concluded that empirical research provides very mixed evidence on these issues and that it is not well connected to recent theoretical work.

The Bank of Japan: Central Bank Independence and the Politicization of Monetary Policy

2021 ◽  
Author(s):  
Gene Park
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Prime Minister ◽  
Central Bank Independence ◽  
Executive Power ◽  
Theoretical Justification ◽  
Electoral Incentives ◽  
Economic Stagnation ◽  
Bank Of Japan ◽  
The Government

In April 1998, the Bank of Japan (BOJ) gained legal independence. While the primary theoretical justification was to enhance the central bank’s inflation-fighting credibility, the newly independent BOJ immediately confronted a different and unexpected problem: a long and persistent deflation. As the government battled economic stagnation, debates over the extent to which the BOJ should prioritize overcoming deflation and the policies that should be employed to this end led to a profound politicization of monetary policy. This culminated in the Prime Minister Abe’s landslide electoral victory at the end of 2012 in which he campaigned on overcoming deflation, and then, once in power, effectively took over control of a previously intransigent BOJ Policy Board to reflate the economy. The democratic electoral process paved the way for a reassertion of control over the still legally independent central bank. From a wider perspective, these developments reflect broader changes in Japanese democracy: the greater influence of electoral incentives on policy and the centralization of executive power.

scholarly journals Independence Before Conservatism: Transparency, Politics and Central Bank Design

2005 ◽  
Vol 6 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Andrew Hughes Hallett ◽  
Diana N. Weymark
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Institutional Design ◽  
Central Bank Independence ◽  
Optimal Outcomes ◽  
Second Stage ◽  
Stage Game ◽  
The Government ◽  
Monetary And Fiscal Policy

Abstract The problem of monetary policy delegation is formulated as a two-stage game between the government and the central bank. In the first stage the government chooses the institutional design of the central bank. Monetary and fiscal policy are implemented in the second stage. When fiscal policy is taken into account, there is a continuum of combinations of central bank independence and conservatism that produce optimal outcomes. This indeterminacy is resolved by appealing to practical considerations. In particular, it is argued that full central bank independence facilitates the greatest degree of policy transparency and political coherence.

The Political Economy of Monetary Policy

2017 ◽  
Author(s):  
Cristina Bodea
Keyword(s):  
Monetary Policy ◽  
World War I ◽  
Central Bank ◽  
Exchange Rates ◽  
Institutional Arrangement ◽  
Central Banks ◽  
Central Bank Independence ◽  
Rate System ◽  
Fixed Exchange Rates ◽  
The Government

The recent global economic crisis has renewed interest in the nature and history of monetary policy, the distributional effects of central bank policy, central bank governance, and the personalities at the helm of major central banks. In modern times, a country’s central bank formulates, or, to a minimum, implements, a country’s monetary policy, or the process of adjustment of a country’s money supply to achieve some combination of stable prices and sustainable economic growth. Monetary policy depends heavily on a country’s exchange rate system. Under fixed exchange rates, the country’s commitment to keep the level of the currency at a certain level dictates monetary policy to a great degree. As the gold standard was unraveling after World War I, many countries experienced high inflation or even hyperinflation. A similar situation faced monetary policy after the collapse of the Bretton Woods system of fixed exchange rates in the 1970s. By the 1980s, however, countries turned toward central bank independence as an institutional arrangement to control inflation. The current issues surrounding monetary policy have emerged from the historical increase in central bank independence and the 2007 economic and financial crisis. In particular, the opacity of central bank decisions, given their autonomy to pursue stable prices without political interference, has increased the demand for transparency and communication with the government, the public, and financial markets. Also, the 2007 crisis pushed central banks toward unconventional measures and macro-prudential regulation, and brought back into focus the monetary policy of the euro area.

scholarly journals Gordon Unbound: The Heresthetic of Central Bank Independence in Britain

2012 ◽  
Vol 43 (2) ◽  
pp. 263-293 ◽  
Author(s):  
Sebastian Dellepiane-Avellaneda
Keyword(s):  
Central Bank ◽  
Party Politics ◽  
Central Bank Independence ◽  
The Political ◽  
Contentious Issue ◽  
Political Rationality ◽  
Constraint Theory ◽  
Monetary Constitution ◽  
Central Argument ◽  
The Government

This article combines theory and narrative to shed new light on the politics surrounding the making of central bank independence in contemporary Britain. Its central argument is that Gordon Brown's rewriting of the British monetary constitution in May 1997 constituted political manipulation in a Rikerian sense. The government removed a contentious issue from party politics in order to signal competence and enforce internal discipline. Building on Elster's constraint theory, the paper argues that Brown adopted a pre-commitment strategy aimed at binding others. The heresthetic move had dual consequences, both constraining and enabling. The institutionalization of discipline enabled New Labour to achieve economic and political goals. By revisiting the political rationality of precommitment, this article questions the dominant credibility story underlying the choice of economic institutions.

Fiscal and Monetary Policy under External Volatility

2006 ◽  
pp. 4-27
Author(s):  
E. Gurvich
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Trade Balance ◽  
Commodity Prices ◽  
Russian Economy ◽  
Policy Objectives ◽  
The Government ◽  
The Impact ◽  
Fiscal And Monetary Policy

Specific requirements on macroeconomic policy, stemming from the impact of external volatility on trade balance and fiscal revenues are studied. Income gains or losses of the Russian economy due to variation in the commodity prices are found to range from -9 to +12% of GDP over the last decade. Contribution of the government and the Central Bank to neutralizing windfall revenues is evaluated, an approach to sharing their functions is suggested. It is demonstrated that monetary policy in the post-crisis period has been aimed rather at restraining ruble appreciation, than at smoothing the effect of external volatility. Expediency to formulate fiscal policy objectives and budget rules in terms of structural deficit (adjusted for windfall revenues) is argued.

scholarly journals Impact of Monetary Policy on Bank’s Profitability: A Study on Listed Commercial Banks in Bangladesh

2020 ◽  
Vol 5 (2) ◽  
pp. 72-79
Author(s):  
Md. Ariful Hoque ◽  
Afzal Ahmad ◽  
Mustafa Manir Chowdhury ◽  
Mohammad Shahidullah
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Commercial Banks ◽  
Banking System ◽  
Open Market ◽  
Return On Equity ◽  
Time Deposits ◽  
The Government ◽  
The Impact ◽  
Reserve Ratio

Monetary policy is the policy by which the government of a country control supplies of money in an economy which is announced by the central bank for every six months. Central Bank carries out monetary policy by the banking system of a country.  Central Bank uses Bank rate; Cash reserve ratio and open market operation to control the availability of funds in an economy. Within these three instruments, the cash reserve ratio is directly linked to the commercial bank's profitability. Every commercial bank maintains a cash reserve ratio against their demand & time deposits. Being changes in the cash reserve ratio banks profit level may increase or decrease. The prime intention here is to show the impact of monetary policy, especially Cash Reserve Ratio on the commercial bank's profitability. This study covers only listed commercial banks in Bangladesh. As sample researcher purposively selected 15 listed commercial banks that have available information. Results revealed that CRR negatively related to Return On Assets (-0.1133), Return On Equity (-0.0577) as well as Return On Investment (-0.0504). This means the bank's profitability declined due to the increase in cash reserve ratio (CRR). Again regression analysis outlined that the cash reserve ratio negatively impacts on the profitability of studied commercial banks in Bangladesh, which is statistically significant at the 10% level. Researchers proposed that Bangladeshi commercial banks will design their profitability plan by considering monetary policy tools, particularly the Cash reserve ratio.

Big Business Lobbying in Japan: The Case of Central Bank Reform

1961 ◽  
Vol 55 (3) ◽  
pp. 527-538
Author(s):  
Frank C. Langdon
Keyword(s):  
Central Bank ◽  
Great Influence ◽  
Business Community ◽  
The Political ◽  
Big Business ◽  
Political Activities ◽  
Bank Reform ◽  
The Government ◽  
The Impact ◽  
Business Influence

The political activities of the business community in Japan have not received the scholarly attention they deserve. Because of the paucity of information and the lack of serious studies, the nature of the political power of Japanese business is poorly understood. The popular notion that big business is influential in politics is quite correct, but just how the influence is exercised, or how much influence can be brought to bear in a particular field of policy, or what conditions limit or augment business influence are far from clear.This paper seeks to single out some of the important conditions affecting the impact of business influence in Japanese government and politics. The case approach is used, and the case is the abortive effort toward central bank reform. Even though this episode concerns only a small portion of the government machinery and the single field of monetary policy, it nevertheless demonstrates the methods commonly employed by business to reach decisions within its own group, the competition with others encountered in persuading the government to act, and the strength of bureaucratic forces resisting change. The simplicity of this case is an advantage in depicting the conflicting groups and the influence they were able to exert. Later studies may reveal more of the pattern of business action on other economic problems and in other areas of government and politics. The bank case showed the great influence of group and personal loyalties as well as the power of one of the government ministries.

Financial and monetary policy of the State and its impact on the income level and poverty reduction in Russia

2020 ◽  
Vol 26 (5) ◽  
pp. 964-990
Author(s):  
N.I. Kulikov ◽  
V.L. Parkhomenko ◽  
Akun Anna Stefani Rozi Mobio
Keyword(s):  
Monetary Policy ◽  
Household Income ◽  
Poverty Reduction ◽  
The State ◽  
Financial Policy ◽  
Gdp Growth ◽  
Tax Rate ◽  
Gdp Growth Rate ◽  
The Government ◽  
The Impact

Subject. We assess the impact of tight financial and monetary policy of the government of the Russian Federation and the Bank of Russia on the level of household income and poverty reduction in Russia. Objectives. The purpose of the study is to analyze the results of financial and monetary policy in Russia and determine why the situation with household income and poverty has not changed for the recent six years, and the GDP growth rate in Russia is significantly lagging behind the global average. Methods. The study employs methods of analysis of scientific and information base, and synthesis of obtained data. The methodology and theoretical framework draw upon works of domestic and foreign scientists on economic and financial support to economy and population’s income. Results. We offer measures for liberalization of the financial and monetary policy of the government and the Central Bank to ensure changes in the structure of the Russian economy. The proposed alternative economic and financial policy of the State will enable the growth of real incomes of the population, poverty reduction by half by 2024, and annual GDP growth up to 6 per cent. Conclusions. It is crucial to change budget priorities, increase the salaries of public employees, introduce a progressive tax rate for individuals; to reduce the key rate to the value of annual inflation and limit the bank margin. The country needs a phased program to increase the population's income, which will ensure consumer demand.

Referendum konstytucyjne we Włoszech. Jak głosowanie ludowe wpływa na system polityczny państwa?

2017 ◽  
pp. 110-127 ◽  
Author(s):  
Elżbieta Kużelewska
Keyword(s):  
Political System ◽  
Public Support ◽  
The Political ◽  
The Government ◽  
The Impact

This article analyses the impact of constitutional referendums on the political system in Italy. There were three constitutional referendums conducted in 2001, 2006 and 2016. All of them have been organised by the ruling parties, however, only the first one was successful. In the subsequent referendums, the proposals for amending the constitution have been rejected by voters. The article finds that lack of public support for the government resulted in voting „no” in the referendum.

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