JOURNAL ARTICLE
Cite JOURNAL ARTICLE
Style
Format
The Political Economy of Monetary Policy Decisions
Credit and Capital Markets – Kredit und Kapital, Vol. 21 (1988), Iss. 1 : pp. 1–7
Additional Information
Article Details
Author Details
Charles A. E. Goodhart
References
-
Barro, Robert: “Recent Developments in the Theory of Rules versus Discretion,” Economic Journal, Supplement, 96, 1986, 23 – 27.
Google Scholar -
Barro, Robert and David Gordon: “Rules, discretion and regulation in a model of monetary policy,” Journal of Monetary Economics, 12, July 1983, 101 – 102.
Google Scholar -
Barro, Robert and David Gordon: “A Positive Theory of Monetary Policy in a Natural Rate Model,” Journal of Political Economy, 91, August 1983, 589 – 610.
Google Scholar -
Frey, Bruno and Friedrich Schneider: “Central Bank behavior: A positive empirical analysis,” Journal of Monetary Economics, 7, May 1981, 291 – 316.
Google Scholar -
Kydland, Finn and Edward Prescott: “Rules rather than discretion: The inconsistency of optimal plans,” Journal of Political Economy, 85, (June 1977), 473 – 91.
Google Scholar -
Mayer, Thomas: “The Debate About Monetarist Policy Recommendations,” Kredit und Kapital, 20, 1987, 281 – 302.
Google Scholar -
Parkin, Michael and Robin Bade: “Central Bank laws and monetary policy”, Paper presented at the Fifth Interlaken Conference on Analysis and Ideology, June 1978, unpublished.
Google Scholar -
Poole, William: “Monetary Control and the Political Business Cycle”, Cato Journal, 5, Winter 1986, 685 – 700.
Google Scholar
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.