The Political Economy of Monetary Policy Decisions
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The Political Economy of Monetary Policy Decisions
Credit and Capital Markets – Kredit und Kapital, Vol. 21 (1988), Iss. 1 : pp. 1–7
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Charles A. E. Goodhart
References
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Abstract
The Political Economy of Monetary Policy Decisions
Mayer (1987) claims that the Central Bank does not operate discretionary monetary policy efficiently owing to “political pressures, the central bank’s self-interest and the potential for X-inefficiency”. While this politico-economic approach can be illuminating, Mayer does not specify in sufficient detail the nature of such political pressures. One cause of such pressures may be a desire of the majority, of poorer workers, to redistribute wealth away from the rich rentier. While my personal experience leads me to dismiss the “self-interest” and “X-inefficiency” theories, Iwould put more weight than Mayer on time-inconsistency problems.