Central Bank or Single Authority? Political Cycle, Monetary Policy and Financial Supervision

39 Pages Posted: 29 Sep 2005

See all articles by Raffaella Barone

Raffaella Barone

University of Salento - Department of Law

Abstract

The aim of this paper is to present a principal-and-two-agents model, by which to assess the role of the political cycle in determining the design of the institutions of monetary and of regulatory policy. In particular the specific issue is: should the responsibility of the two policies be concentrated in the hands of the central bank or not? In examining the policymaker's choice between single and multiple authority, two phases are identified, the electoral and non-electoral periods. The conclusion reached is that the electoral cycle is irrelevant, while what is relevant are the costs of "capture" involved in the different institutional scenarios.

Suggested Citation

Barone, Raffaella, Central Bank or Single Authority? Political Cycle, Monetary Policy and Financial Supervision. University of Lecce Economics Working Paper No. 75/36, Available at SSRN: https://ssrn.com/abstract=809025 or http://dx.doi.org/10.2139/ssrn.809025

Raffaella Barone (Contact Author)

University of Salento - Department of Law ( email )

Campus Universitario - Via Li Tufi
LECCE, LE 73020
Italy

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