Financial Crisis: The Capture of Central Banks by the Financial Sector?

Carré, Emmanuel; Gauvin, Marie-Sophie

doi:10.1080/08911916.2018.1497576

Cited by 4 publications

(4 citation statements)

References 54 publications

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“…Central banks have been tasked with ensuring financial stability due to them having control over the strongest instruments and unique powers in times of financial crisis (e.g., institutional capital, access to international networks, emergency liquidity, and lender of last resort capabilities). However, while an independent central bank supposedly serves no constituencies but its government, in some circles central banks are criticised as being "too close" to the financial sector: governors, executives and board members 2 are often former investment bankers or "pro-finance" academics, which may suggest the "capture" of the central bank by the financial sector (Carre and Gauvin 2018). Rogoff (1985Rogoff ( , 1180 goes as far as suggesting that a central banker has a financial incentive to "improve his standing in the financial community" in order to "earn greater remuneration upon returning to the private sector."…”

Section: Distributional Consequences and The Public Interestmentioning

confidence: 99%

Central Bank Independence, Inflation and Money Growth: Evidence from South Africa

Vermeulen

2024

SABR

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Purpose: This article evaluates the impact of the de jure independence of the South African Reserve Bank (SARB) on the credibility and discipline of domestic monetary policy. Credibility captures the extent to which economic agents trust the SARB to pursue its price stability mandate and is measured by the relationship between the SARB’s independence and domestic inflation. Discipline relates to the effect of independence on money growth rates, while independence is associated with a more disciplined central bank and moderate money growth rates. Methodology: A simple autoregressive distributed lag (ARDL) econometric specification and Granger causality tests are employed. Following the extant empirical literature, existing indexes of central bank independence (CBI) are regressed on annual rates of inflation and M2 money growth. Findings: A statistically significant negative relationship is established between both i) CBI and inflation and ii) CBI and money growth for the South African economy. This suggests that the SARB’s legal independence plays an important role in containing inflation (credibility) and limiting excessive money growth (discipline). Contribution: This article fills a gap in the extant literature by being the first attempt at formalising the empirical link between de jure CBI, inflation, and the rate of money growth in the South African economy.

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Section: Distributional Consequences and The Public Interestmentioning

confidence: 99%

Central Bank Independence, Inflation and Money Growth: Evidence from South Africa

Vermeulen

2024

SABR

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“…Despite complexities and limitations (Bodea & Hicks, 2015), common wisdom holds that ICBs, all else equal, have more credibility and are expected to lower inflation over time (see discussion in Fernández-Albertos, 2015). Even if ostensibly ICBs are simply captured by the financial sector or economists, the same policy outcome emerges because those capturing the central bank use the institution to pursue monetary stability over other priorities (Carré & Gauvin, 2018).…”

Section: Interests Institutions and Autonomymentioning

confidence: 99%

Interests over institutions: Political‐economic constraints on public debt management in developing countries

Cormier

2020

Governance

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Some use the model of independent central banks to posit that independent Debt Management Offices (DMOs) can enhance public debt sustainability. This study argues this is unlikely in developing countries. Developing country DMOs have limited space to apolitically manage (a) debt levels and (b) borrowing strategies. A comparison of South Africa and Botswana, using in‐depth interviews and primary sources, traces public debt processes to argue DMOs are unlikely to significantly affect the link between political interests and these two key public debt outcomes over time. This argument has three implications. First, it gives rise to questions about the role of institutions in the governance of public debt. Second, it adds to recent literature on developing country external borrowing preferences by highlighting ideological effects. Third, it reinforces the idea that political economy theories of the relationship between interests, institutions, and policy outcomes should vary by policy area and national income level.

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“…Profound effects of this cultural and scientific environment were experienced by banking regulation. Even central bankers were captured by the bubble and proposed ideas such as those proposed by Donald Kohn in 2007: "we need to have faith in the invisible hand" (Dombret and Lucius [2013]; see also Carré and Gauvin [2015]). This faith meant deregulation.…”

Section: Bubbling Banking Regulationmentioning

confidence: 99%

Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework

Mastromatteo

Esposito

2016

SSRN Journal

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The global financial crisis shattered the conventional wisdom about how financial markets work and how to regulate them. Authorities intervened to stop the panic-shortterm pragmatism that spoke volumes about the robustness of mainstream economics. However, their very success in taming the collapse reduced efforts to radically change the "big bank" business model and lessened the possibility of serious banking reformmeaning that a strong and possibly even bigger financial crisis is inevitable in the future. We think an overall alternative is needed and at hand: Minsky's theories on investment, financial stability, the growing weight of the financial sector, and the role of the state. Building on this legacy, it is possible to analyze which aspects of the post-2008 reforms actually work. In this respect, we argue that the only effective solution is to impose a global cap on the absolute size of banks.

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Financial Crisis: The Capture of Central Banks by the Financial Sector?

Cited by 4 publications

References 54 publications

Central Bank Independence, Inflation and Money Growth: Evidence from South Africa

Central Bank Independence, Inflation and Money Growth: Evidence from South Africa

Interests over institutions: Political‐economic constraints on public debt management in developing countries

Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework

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