Hostname: page-component-76fb5796d-qxdb6 Total loading time: 0 Render date: 2024-04-26T05:42:54.861Z Has data issue: false hasContentIssue false
  • English
  • Français

Independent Agencies, Distribution, and Legitimacy: The Case of Central Banks

Published online by Cambridge University Press:  23 December 2019

PETER DIETSCH Open the ORCID record for PETER DIETSCH [Opens in a new window]
PETER DIETSCH*
Affiliation:
Université de Montréal
*
*Peter Dietsch, Professor, Département de Philosophie, Université de Montréal, peter.dietsch@umontreal.ca.
Get access Rights & Permissions [Opens in a new window]

Abstract

Delegation to independent agencies can reap real benefits for policy-making. In the case of monetary policy, it shores up the credibility of the central bank. However, the discretion of IAs needs to be constrained to ensure their legitimacy. This letter focuses on one potential constraint, namely, the idea that IAs should not make choices on distributional trade-offs. Given that monetary policy today has significant distributive consequences, if this constraint were respected, the independence of central banks would have to be repealed. This would be just as undesirable as a monetary policy whose distributive consequences remain unchecked. Instead, this letter encourages the search for alternative solutions and puts forward three possible institutional arrangements to manage the tension between the distributive consequences of monetary policy on the one hand and central bank legitimacy on the other.

Type
Letter
Information
American Political Science Review , Volume 114 , Issue 2 , May 2020 , pp. 591 - 595
Copyright
Copyright © American Political Science Association 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Thank you to two anonymous referees for their helpful comments, as well as to François Claveau and Clément Fontan for many discussions on the ethical dimensions of monetary policy.

References

REFERENCES

Alesina, Alberto, and Tabellini, Guido. 2008. “Bureaucrats or Politicians? Part II: Multiple Policy Tasks.” Journal of Public Economics 92: 426–47.CrossRefGoogle Scholar
Ampudia, Miguel, Georgarakos, Dimitris, Slacalek, Jiri, Tristani, Oreste, Vermeulen, Philip, and Violante, Giovanni L.. 2018. “Monetary Policy and Household Inequality.” ECB Discussion Paper No. 2170.CrossRefGoogle Scholar
Barro, Robert, and Gordon, David B.. 1983. “Rules, Discretion and Reputation in a Model of Monetary Policy.” Journal of Monetary Economics 12 (1): 101–21.CrossRefGoogle Scholar
Blyth, Mark, and Lonergan, Eric. 2014. “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People.” Foreign Affairs, No. 93.Google Scholar
Buchanan, Allen. 2002. “Political Legitimacy and Democracy.” Ethics 112 (4): 689–719.CrossRefGoogle Scholar
Buchanan, James. 2010. “The Constitutionalization of Money.” Cato Journal 30 (2): 251–8.Google Scholar
Bunn, Philip, Pugh, Alice, and Yeates, Chris. 2018. “The Distributional Impact of Monetary Policy Easing in the UK between 2008 and 2014.” Bank of England Staff, Working Paper No. 720.Google Scholar
Carney, Mark. 2014. “Inclusive Capitalism: Creating a Sense of the Systemic.” Available at: https://www.bis.org/review/r140528b.htm.Google Scholar
Coibion, Olivier, Gorodnichenko, Yuriy, Kueng, Lorenz, and Silvia, John. 2017. “Innocent Bystanders? Monetary Policy and Inequality.” Journal of Monetary Economics 88: 70–89.CrossRefGoogle Scholar
Colciago, Andrea, Samarina, Anna, and de Haan, Jacob. 2019. “Central Bank Policies and Income and Wealth Inequality: A Survey.” Journal of Economic Surveys 33 (4): 1199–231.CrossRefGoogle Scholar
De Haan, Jacob, and Eijffinger, Sylvester. 2016. “The Politics of Central Bank Independence.” DNB, Working Paper No. 539.Google Scholar
Dietsch, Peter, Claveau, François, and Fontan, Clément. 2018. Do Central Banks Serve the People? Cambridge: Polity Press.Google Scholar
Elster, Jon. 1994. “Constitutional Courts and Central Banks: Suicide Prevention or Suicide Pact?” East European Constitutional Review 3: 66–71.Google Scholar
Fisher, Irving. 1935. 100% Money. New York: The Adelphi Company.Google Scholar
Fontan, Clément, Claveau, François, and Dietsch, Peter. 2016. “Central Banking and Inequalities: Taking off the Blinders.” Politics, Philosophy & Economics 15 (4): 319–57.CrossRefGoogle Scholar
Forder, James. 1998. “Central Bank Independence: Conceptual Clarifications and Interim Assessment.” Oxford Economic Papers 50 (3): 307–34.CrossRefGoogle Scholar
Goodhart, Charles. 1994. “Game Theory for Central Bankers: A Report to the Governor of the Bank of England.” Journal of Economic Literature 32 (1): 101–14.Google Scholar
Keefer, Philip, and Stasavage, David. 2003. “The Limits of Delegation: Veto Players, Central Bank Independence and the Credibility of Monetary Policy.” American Political Science Review 97 (3): 407–23.CrossRefGoogle Scholar
Kydland, Finn E., and Prescott, Edward C.. 1977. “Rules Rather Than Discretion: The Inconsistency of Optimal Plans.” Journal of Political Economy 85 (3): 473–91.CrossRefGoogle Scholar
Majone, Giandomenico, ed. 1996. Regulating Europe. London: Routledge.Google Scholar
OECD. 2002. Distributed Public Governance. Agencies, Authorities and Other Government Bodies. Paris: OECD Publishing.Google Scholar
Peter, Fabienne. 2008. Democratic Legitimacy. New York: Routledge.Google Scholar
Peter, Fabienne. 2017. “Political Legitimacy.” In The Stanford Encyclopedia of Philosophy, ed. Zalta, Edward N.. Stanford: Metaphysics Research Lab. Available at: https://plato.stanford.edu/archives/sum2017/entries/legitimacy/.Google Scholar
Reddy, Sanjay. 2003. “Developing Just Monetary Arrangements.” Ethics and International Affairs 17 (1): 81–93.CrossRefGoogle Scholar
Robinson, Lisa A., Hammitt, James K., and Zeckhauser, Richard. 2016. “Attention to Distribution in U.S. Regulatory Analyses.” Review of Environmental Economics and Policy 10 (2): 308–28.CrossRefGoogle Scholar
Rosanvallon, Pierre. 2011. Democratic Legitimacy: Impartiality, Reflexivity, Proximity. Princeton: Princeton University Press.Google Scholar
Tucker, Paul. 2018. Unelected Power. The Quest for Legitimacy in Central Banking and the Regulatory State. Princeton: Princeton University Press.Google Scholar
Van’t Klooster, Jens. 2019. “The Ethics of Delegating Monetary Policy.” The Journal of Politics. https://doi.org/10.1086/706765.Google Scholar
White, William R. 2012. “Ultra Easy Monetary Policy and the Law of Unintended Consequences.” Federal Reserve Bank of Dallas. Available at: https://www.dallasfed.org/∼/media/documents/institute/wpapers/2012/0126.pdf.CrossRefGoogle Scholar