The Limits of Delegation: Veto Players, Central Bank Independence, and the Credibility of Monetary Policy

Keefer, Philip; Stasavage, David

doi:10.1017/s0003055403000777

Cited by 462 publications

(304 citation statements)

References 38 publications

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“…This explanation parallels that offered by Keefer and Stasavage (2003) for the choice of delegation to an independent central bank in a polity marked by multiple veto points. However, the account above underscores that the polarization of preferences across different actors arose because monetary policy, and attitudes to inflation, were not solely the province of specialized or concentrated interests.…”

Section: The Mobilization Of Oppositionmentioning

confidence: 83%

“…A second generation of scholarship on central bank independence has made independence endogenous, highlighting the institutional factors that increase the incentives to delegate and inhibit attempts at subsequent political control (Posen, 1995, Keefer andStasavage, 2003). That analysis is particularly The analysis, then, casts doubt on whether macro-prudential regulation, by the Fed or others, can meet the expectations raised by Dodd-Frank.…”

Section: Discussionmentioning

confidence: 97%

“…Only a very independent agency, it is argued, could undertake a policy role that will surely meet with political opposition. Yet, as with other agencies, the independence of the Fed is defined by law and can be amended by law (Posen, 1995, Keefer and Stasavage, 2003, see also Blinder, 1998 defined by an agency's ability to manage the delegating relationship and thus to set the policy that it considers appropriate, despite potential or actual opposition from Congress and/or the President.…”

Section: A Endogenizing Independencementioning

confidence: 99%

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Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Goodhart

2014

Review of International Political Economy

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The Financial Crisis that started in 2007 ushered in new responsibilities for central banks, particularly for what is termed "macro-prudential policy," or MPP. The goal of this policy is to monitor and contain overall risk in the financial sector. Implementing MPP, however, carries the potential for distributional conflict with the largest financial firms and the politicization of central bank policy. In light of this risk, this essay analyses the institutional implications of MPP for a leading central bank, the U.S. Federal Reserve. Specifically, how will MPP affect the autonomy of the Fed to set the policy it thinks right? The analysis is based on interviews with financial regulators, including Fed staffers and policymakers, and with journalists who report on financial regulation. It is also informed by a case study of the "Volcker Revolution" in monetary policy. Based on these sources, I identify the factors that contributed to All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the publisher nor be issued to the public or circulated in any form other than that in which it is published.Requests for permission to reproduce any article or part of the Working Paper should be sent to the editor at the above address.

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Section: The Mobilization Of Oppositionmentioning

confidence: 83%

Section: Discussionmentioning

confidence: 97%

Section: A Endogenizing Independencementioning

confidence: 99%

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Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Goodhart

2014

Review of International Political Economy

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“…for each chamber of the legislature, if a chief executive exists, and for every party in a governing coalition. Beck et al (2001) and Keefer and Stasavage (2003) provide more information on CHECKS.…”

Section: Data Considerationsmentioning

confidence: 99%

“…The political institution of particular interest in this paper is the number of legislative units (LUs) (or veto players). LUs are branches of government such as (dependent on the political system) the president, the prime minister, the chambers of parliament or congress, the government coalition parties or the majority party (see Tsebelis 1999Tsebelis , 2002Keefer and Stasavage 2003). 5 While the feedback effects of FDI on environmental regulations have received very little attention within the PHH literature, the impact of political institutions on these feedback effects has never previously been examined.…”

Section: Introductionmentioning

confidence: 99%

Institutionalized pollution havens

Cole¹,

Fredriksson²

2009

Ecological Economics

104

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This paper provides a lobby group theory based on Prat and Rustichini (Econometrica 2003) which suggests that the effect of foreign direct investment (FDI) on environmental policies is conditional on the structure of host countries' political institutions. In particular, FDI raises environmental policy stringency where the number of legislative units (such as the chambers of parliament or congress, government parties, the president, or the prime minister) are many, but reduces it where the legislative units are few. Our panel data evidence is fully consistent with this prediction. Pollution havens are thus more likely to occur in countries with institutional structures involving few legislative units. Finally, we show the empirical importance of endogenizing environmental policy in pollution haven hypothesis studies. Only when environmental policy is treated as endogenous does environmental policy stringency have a significant negative effect on FDI. This sheds new light on the existing literature on the pollution haven hypothesis.

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The Formal Independence of Regulators: A Comparison of 17 Countries and 7 Sectors

Gilardi

2005

Swiss Political Science Review

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This article seeks to explain the pattern of delegation to independent regulatory agencies in Western Europe. Two types of arguments are advanced to explain variations in the formal independence of regulators. Firstly, the need for governments to increase their credible commitment capacity may lead them to delegate regulation to an agency that is partly beyond their direct control. Secondly, delegation may be a response to the political uncertainty problem, which arises when governments are afraid of being replaced by another coalition with different preferences, which could decide to change existing policy choices. In addition, veto players may constitute a functional equivalent of delegation, since they influence policy stability and therefore tend to mitigate both the credibility and the political uncertainty problems. These arguments are consistent with the results of the empirical analysis of the formal independence of regulators in seventeen countries and seven sectors.

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The Limits of Delegation: Veto Players, Central Bank Independence, and the Credibility of Monetary Policy

Cited by 462 publications

References 38 publications

Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Institutionalized pollution havens

The Formal Independence of Regulators: A Comparison of 17 Countries and 7 Sectors

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