The partisanship of a central banker

Abstract

Even if formally established as independent, central banks may still be subject to partisan influences. The paper uses a simple new-Keynesian framework to model these influences as quiescence (i.e. when the central bank aligns with the ideological preferences of the incumbent government) or demurral (i.e. when the central bank moves away from the ideological preferences of the incumbent). The partisanship of the central bank then depends on which of these two prevails. The empirical analysis shows that different patterns of quiescence and demurral occur in different countries at different times. There is however also evidence that in some circumstances the conduct of monetary policy is non-partisan; that is, neither quiescence nor demurral prevails.