What role could unconventional monetary policy - and particularly unconventional policies like private asset purchases under a quantitative easing or lender of last resort scheme - play in influencing economic growth directly? A wide literature in economics explores the pros and cons of using...

Because of secrecy, little is known about the political economy of central bank lending. Utilizing a novel, hand-collected historical daily dataset on loans to commercial banks, we analyze how personal connections matter for lending of last resort, highlighting the importance of governance for...

We investigate whether ideology drives the sentiments of parliamentarians when they speak to the central bank they hold accountable. To this end, we collect textual data on the quarterly hearings of the ECB President before the European Parliament from 1999 to 2019. We apply sentiment analysis...

We provide a multidimensional characterization of monetary policy frameworks across three pillars: Independence and Accountability, Policy and Operational Strategy, and Communications (IAPOC). We construct the IAPOC index by analyzing central banks' laws and websites for 50 advanced economies,...

Central bank independence has been championed on the grounds that it avoids political business cycles, the time-inconsistency problem of discretionary monetary policy, and political conflicts. However, after the financial crisis, central banks have resorted to unconventional monetary policies...

"What should be the role of the ECB in tackling the socio-ecological challenges related to planetary boundaries, such as climate change and loss of biodiversity? A clear answer to this question is still lacking, in spite of the strategy review of 2021. Regretfully, this review has not received...

This study investigates the relationship between central bank independence and financial stability in a global sample covering 56 countries from 1980 to 2012. We find strong and robust evidence that central bank independence and its four dimensions (personnel independence, financial...

Voluminous theoretical and empirical research shows that real exchange rate (RER) undervaluation could be conducive to economic development. Why do countries then often avoid the pursuit of policies that facilitate undervaluation or even intentionally pursue RER overvaluation? We address this...

Central bank independence is usually determined by institutional developments, and whether culture affects central bank independence is understudied. In this paper, we comprehensively examine the relationship between Hofstede national cultures and central bank independence. We propose several...

Despite a recent surge in the academic literature on central bank independence (CBI), little is known about its drivers in authoritarian states. Our theoretical argument starts from the simple idea that no country is an island. Whereas autocratic regimes possessing abundant resource wealth have...

In the last three decades, legal delegation of monetary policy to independent central banks (CBI) has achieved the status of a global norm of good governance. The recent backlash against this independence is an important but understudied trend. Our paper analyzes the potential for delegation...

Comparing and contrasting the Fed’s and ECB’s policy responses to the 2008 Global Financial Crisis (GFC) and the COVID-19 pandemic highlights the importance of the fiscal dimension of monetary policy and the pitfalls that can arise when the synergy of fiscal and monetary policy is neglected...

A central bank has preferences that differ from the political authority. While the central bank is independent, i.e. it maximizes its own preferences, households do not know this. Instead, households observe the interest rate choices of the central bank and update their beliefs regarding central...

This paper argues, first, that it is inappropriate to presume that central banks will, in the absence of any tangible precommitment technology, inevitably behave in a `discretionary' fashion that implies an inflationary bias. Furthermore, there is no necessary tradeoff between `flexibility and...

This paper describes interactions between monetary and fiscal policies that affect equilibrium price levels and interest rates by critically surveying theories about (a) optimal anticipated inflation, (b) optimal unanticipated inflation, and (c) conditions that secure a "nominal anchor'' in the...

This paper focuses on the trade–offs that central banks would face if they were to start tackling climate change. Disruptive natural events can hamper growth and capital accumulation, thereby affecting price and financial stability – elements for which central banks are responsible. Yet, the...

Since its founding in 1913, the central bank of the United States has enjoyed a reputation as an erudite institution. Rigorous, well-resourced, and expansive research has become a hallmark of the Federal Reserve System. Indeed, research is itself a core function of the Fed: it both underpins Fed...

This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of...

This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of...

International organizations (IOs) often drive policy change in member countries. Given IOs' limited political leverage over a member country, previous research argues that IOs rely on a combination of hard pressures (i.e., conditionality) and soft pressures (i.e., socialization) to attain their...

Since the 1980s, income inequality has increased substantially in several countries. Yet the political logic that triggered rising inequality in some places but not in others remains poorly understood. This paper builds a theory that links central bank independence to these dynamics. It posits...

This paper proposes a novel theory of reserve accumulation that emphasizes the role of an independent central bank. Motivated by a positive correlation between reserve accumulation and central bank independence in Latin America, the paper develops a quantitative sovereign default model with an...

Historically Central Bank Independence (CBI) was anything but the norm. CBI seems to contradict core principles of democracy. Most economists were also against CBI. After the Great Inflation of the 1970ies many empirical studies demonstrated that there is a strong negative correlation between...

Fintech presents unique opportunities for central banks. The rapid changes in technology that are transforming the financial system will allow central banks to enhance the execution of various of their core functions, such as currency issuance and payment systems. But some aspects of fintech...

Deep economic crises - the global financial crisis and the Coronavirus disease 2019 (COVID-19) pandemic - have put some strains on and rekindled an older debate about the costs and benefits of central bank Independence. Central banks have been accorded more independence since the 1970s, which...

An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange-rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation....

We create a new measure of the political pressure faced by the Federal Reserve based on the analysis of transcripts of the Chairs' testimonies to Congress. We find that the use of non-traditional policies at low interest rates led to increased political criticism. We develop a model where the...

This paper investigates the effects of government bond purchases by the European CentralBank (ECB) on the degree of fiscal policy accommodation (DFPA) communicated in its pressconferences. I use a text mining approach to quantify the DFPA of the ECB and a proxyFactor-Augmented VAR to assess the...

This paper reviews the evolution of the literature on Central Bank Independence (CBI) focusing on its metrics as well as on its empirical association with macroeconomic variables. Part One describes the evolution of the CBI indicators, while Part Two analyses the econometric studies devoted to...