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Pressure on the Bundesbank?
Credit and Capital Markets – Kredit und Kapital, Vol. 33 (2000), Iss. 4 : pp. 468–497
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Philipp Maier, Groningen
References
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Abstract
We investigate whether the German central bank responds to political pressure. We focus on two main points: The rhetoric of the Bundesbank, characterized by the ‘Bundesbank monetary policy index’, and the actual or effective Bundesbank policy, which is measured by the day-to-day interest rate. Besides testing for the political business cycle we also estimate various conflict models. We find that the announced Bundesbank policy responds to political pressure before elections, since the rhetoric shows a clear electoral pattern. However, this does not translate into the effective Bundesbank policy, since the day-to-day rate shows no sign of political influence at all. This result suggests that the Bundesbank pretends relatively expansive monetary policy before elections in its rhetoric to calm down politiciains, but in the mean time shields the effective monetary policy from political pressure. (JEL E52, E58)