The Politics of Central Banking

There is little doubt that the recent financial and economic crisis elevated the public profile of central banks. Since the onset of the crisis in the summer of 2007, central banks have been on the front line of efforts to fix dysfunctional financial markets. To achieve this aim, central banks have significantly stretched the boundaries of traditional monetary policies and taken on new financial regulatory responsibilities. Central banks’ activism and extended powers have attracted public criticisms and political concerns. Some have questioned whether ultra-loose monetary policy is generating new credit bubbles or creating conditions that encourage fiscal profligacy. Others have raised concerns on the maintenance of political independence at the time when central banks’ monetary and financial stability policies have entered into quasi-fiscal territory. The process of exiting from unconventional monetary policies is also contentious, especially in light of the global spillover effects that such processes entail. This workshop taps into these debates by furthering and expanding the analysis of central banking. In particular, the workshop aims at developing a thorough understanding of the politics and policies of central banks in both advanced and developing economies. Attention will focus on identifying the institutional and political-economy factors that shape central banks’ choices in both normal and crisis times. The channels through which central banks develop their analyses and implement their policy preferences as well as the domestic and international consequences also need to be thoroughly investigated. The workshop will also shed light on the challenges and opportunities for central banks’ independence and democratic accountability.