Interests and 'Independence': The European Central Bank and the theory of bureaucracy

The European Central Bank has an unprecedented degree of statutory independence. This is presumably attributable to the view that central banks, unimpeded by external forces, pursue the public interest. That presumption has not always been common in the economics literature, even in the discussion of central banking. The theory of bureaucracy suggests that such institutions pursue their own interests. It is here applied to the European central bank as it was in the past to other central banks. First, consideration is given to what is today implied by the view that central banks are primarily interested in maintaining their independence, maximising their discretion, and avoiding blame for poor outcomes. Second, the ECB's explanations of how it sees its role and status and its presentation of its strategy are considered. Certain limitations in the form of obscure explanation, confused analysis and selective referencing are identified. These appear to suggest that the ECB is concerned with the pursuit of its own agenda. Particular attention is drawn to the danger of paying too much attention to what it says about its own 'accountability'.     

Dollar-Deutschemark Polarisation: Comparing The Pound And Franc

The extent to which movements in the sterling and franc bilateral exchange rates are associated with changes in the dollar‐deutschemark exchange rate is measured. In the case of the pound we find, in contrast to the impression that might be gained from previous studies, that its linkage to the dollar has been, since the late 1990s, as high as it was in the late 1970s. In the case of the franc, we find that it has for some time been a powerfully deutschemark‐linked currency. This calls into question the view that there has been significant ‘dollar‐deutschemark polarity’ with respect to the franc in the recent past. We suggest that policymaker guidance and market rules of thumb may partially explain the developments we observe.     

'Independence' and the founding of the Federal Reserve

The Federal Reserve is ‘independent’, but contrary to opinions often expressed, it was not intended by its creators to be free from political control, although others involved in the debate over its establishment hoped that it would be. ‘Independence’ was independence from banking interests, not government. A gradual development of independence preceded a much greater acquisition of power during the Reagan Presidency. The lessons of history include the fact that with few changes in the Federal Reserve Act, its position in the American government has been dramatically transformed. Consequently, contrary to common practice in the economics literature, the ‘independence’ (from government) of a central bank evidently cannot be measured by tabulating characteristics of its statutes.     

Central bank independence--conceptual clarifications and interim assessment

It is argued that credibility problems in macroeconomics hardlyexist, and certainly do not motivate central bank independence.The Rogoff banker, and much work which follows should be interpretedas blueprints for good policy, not institutional reforms. Thereare likely to be significant but at present unquantified costsassociated with central bank independence once the interactionof monetary and other policymakers is recognised. The evidencethat central bank independence reduces inflation or brings otherbenefits is questioned